Do not buy stocks and bonds without discount
Because the market is efficient, it is difficult to pick stocks long-term leading index. Fortunately, you have a better choice.
There are two strategies for higher consistent returns and lower risk. These are also opportunities for index returns. If you use the margin and have or gain experience, you can achieve a high absolute return of 30% or more.
By buying bonds and stock closed-end funds, you can get high absolute returns and have a lot of stability.
Closed-end funds are like mutual funds. The difference is that the number of closed-end fund shares is limited. They can sell less or more than the sum of the relevant securities.
Buy a fixed income closed-end fund with a discount. You can go to etfconnect.com and search through discounts. A more advanced strategy is to trade closed-end funds on a regular basis and hedge them with options on Treasury ETFs. This government bond exchange traded fund has the stock codes TLT, IEF and SHY. Frequent trades can capture short-term volatility and significantly improve overall results. If you trade, you may notice shorter funds – not just discounts. Closed-end funds, with an average seniority of 5 years, are easier to predict from my experience and therefore easier to trade.
The second chance is to sell the stock. You as a small insurer through the sale of insurance (selling) shares will not reduce the 20-30% lower 0.5-2.5 years from the initial transaction. Place expiration dates wherever possible. LEAPS Stocks – Options expire in the next 2.5 years.
Close to picking stocks to sell You like to buy a business or invest for a long time. I think this strategy is investment – not trading. At least from the perspective of underlying stock selection. Choose a company you, an independent financial publication and / or a trusted advisor to do a lot of research. Looking for cash, on the balance sheet of real estate. Very important is long-term predictable growth (growing even better then overgrowing because it is difficult to predict when the growth phase stops). One of the most important factors is management. The best option can and should include a company that is operated or owned by the best manager or money manager. I mean Sears Holdings (SHLD), managed by billionaire hedge fund manager Eddie Lampert. Eddie Lampert is one of the best and most respected money managers in the United States. Some call him modern Buffett.
He held about five management positions at Sears Holdings. In addition to being one of the best money managers, he is known for his successful retail turnover story.
The second example of stock selection is Hewlett Packard, Mark Hurd as chief executive officer.
Of course one of the most important things to do is to buy a company that has a good reputation for being a good company.
Do not pursue good stories, good products, good prospects, and even brilliant managers, regardless of stock valuations.
With experience, you can add turnaround stories for your portfolio, but make sure to thoroughly study this opportunity. You can in this case sell more expensive insurance (expensive investment).
By using the two strategies above, you can create a balanced portfolio with stocks and fixed income. These two strategies lead to the purchase of securities at a discount. With the sell, you also have leverage, because you need to raise the margin of 10% -20% of the underlying securities.
I think these two strategies may be part of any size portfolio and may be suitable for investors with below average risk tolerance.