Questions to ask yourself before trading ..

Way before trading comes into picture, you have to sturdy your mind. It is essentially a mind game. Unlike work, where you go and do a routine work, trading is something where everyone is coming to work not to mention robots, super computers, politicians, and professionals and businessmen and government with massive resources and law at their disposals. Compared to that, you the teeny tine investor, armed with few blogs and books, supposed divine prudence and assumed mental and emotional strength with often times limited money at disposal. I had jotted down some points from various books and think it might help you too in case you are getting started.

Here it goes. It is unformatted and decidedly random and back of the napkin style writing as that is how it is when it is first written.

“… is it that comes to ur mind when u r thinking of investing in stocks (not mfs)? money coming and going lots of tension periodic updating of stocks and stock ticker and other information ,, keeping tabs …. what do u want to be short term or long term investor ? which one is good? what are ur compromises? what is the disaster recovery program? what is the strategies and methodologies that are going to be used ? what is the algorithm ? how much internet time to devote? how frequently to visit the broker? can it be made fuzzy free ? selling at the right moment ? some stocks can be used to park money some used for good dividends when to enter the market and when to exit ? should we follow the same SIP approach as we did for MF ? or is it combination of all ? is it the mixture and it becomes so hard to comprehend that things get out of control? lots of articles also read on the same. there are also lots of sites providing and recommending about the various companies and so on …. how much should we listen and how much to the gut feel is it worth making a huge fuss over? is it good to have few good stocks rather than massive uncontrollable number of unheard companies do u really want to lose money and here is where the risk profile comes to picture. how much can u really afford to lose before the trip takes over ? information is an imp aspect here. Take it as an input and process something that gives u an output which goes on to redefine the process. so it would operate just like a mf operates. should we build a system so strong to crack or wreck or fail? obviosly returns do matter and just investing in the big ones and realising average gains wont be that good. the returns from stock will have strong competition from mfs. remember this point. We can also do an outsource of stocks to the broker. good knowledgeable broker. look at the charges and then plunge into it. Categorisation: we can also categorise based on the investment horizons like long term short term and durations … buy them (stocks) when everyone wants to sell, and sell them when everyone wants to buy. old wisdom but then how does it work ? There are sector wise portfolio building and also the company wise. The company site gives info about the company future and from this it can be guesstimated to arrive at the right amt to be put in there. The sites gives u info abt how much the good performing funds have put in various cos. This also gives u info abt the companies as the amcs must have done some r&d. Top down: Bird view Bottom up: worm view Tech anal: statistically predict the curve and invest it. Investors should not just study individual stocks but look at the overall economy and try to gauge the market Invest in learning. read research reports. information gathering period. Look behind the scenes. if real estate is booming so will ceramics and paints and cements. Dividend is the key: companies with good dividend record Periodic updating of stocks and stock ticker and other information ,, keeping tabs …. this is inevitable for short term stocks. FAQs: What to buy list and what to sell list? ofcourse of good cos. if it has potential to appreciate more over long term hold on. So the question is when to buy and when to sell? Are you going to buy at high? no. that is too much risk taking. are you going to sell low? nope. So wait till prices drop and then buy and sell only when high. pretty obvious.

“

Rules of the game ..

Some long long time ago, when I was getting started and was a novice guy in the investor world, I had jotted down some rules or key points around which my strategies would revolve. Here are those for fun reading.

Rules of the game:

———————

No tensions to be taken. Set up a process like a fund management co.

This is a long term investment plan. This was also have tax benefits.

If the stocks are good then look at them weekly only. am looking at yearly now.

If there are any loses dont panic. There could be gains coming. If continued loses, hang on. dont make quick decisions. Dont put in too much of internet time.

Factors are good returns, dividends, park money(bid time)

Waiting for the opportunity is preferable to the SIP option.

buylosellhi

categorise based on the investment horizons like long term short term and durations …

Factors in buy are: economy,sector,company(website).

The sites gives u info abt how much the good performing funds have put

in various cos. This also gives u info abt the companies as the amcs must have

done some r&d.

Decision making approaches:

————————————

Top down: bird view.look at the overall economy and try to gauge the market.strong Tech anal of the economy. Very relevant in the case of india.

Bottom up: worm view.good info abt a co. and hold on to it.Look behind the scenes. strong Tech anal of the co. Contra approach. I believe very much in this approach. but not to overkill. very relevant in the case of US

Another sell strategy is to sell in bits. same for buy in bits.but that will also take lots of trade commissions.let us do it a good way and the way it shud be done rather than worry abt rules and commissions. at the same time we will also keep optimise on profits and losses.

Valid perms in buy sell to give +ve returns

 

Another way to invest in stocks:

———————————-

We can also do an outsource of stocks to the broker. good knowledgeable broker. look at the charges and

then plunge into it. Can keep in touch via phone

 

FINAL STEPS of the Algo:

—————————-

Step 1:

R&D:

Info gathering and analysis: Gather the name of many stocks and their recommendations and as much info abt them as possible.

What to buy list

 

Step 2:

set the buy criteria

When to buy? how much? at what price?

Buy it and put it in Bought list

 

Step 3:

Tracking, info gathering and analysis

what to sell list

 

Step 4:

set the sell criteria

When to sell? how much? at what price?

Makes it to sell list and sell it.

——

The end result of this was my own software that I created using Java as the backed and Flex as the front end and also some Javascript. It was essentially a step chart which step up and step down views which will take in a data file for each stock. I used to get this data from various sources and then just feed it and it used to give a good view on whether to buy or not. I think such tools are good for short term rather than very long term view. Maybe there is something called medium term view where one just keeps it for some years.

Quick explanation of things II

Continuing from where we left:

Capital gains are something to be noted on an annual basis where your broker will issue a statement on how much profit you made. Same with capital losses.

It is better to have a list of stocks in different buckets:

– long-term hold bucket,

– shaky bucket if you are not sure about it

– watch list bucket if you are just following it for the time being

– short-term trades bucket : the stocks like Netflix or chipotle which are good for short-term trading where they swing wildly and can be used as means to deploy the swing trading methodology.

– stable bucket – like sector ones or REITs

In a way, I think people discount the notion of owning a home or a rental. Or they just carried away in emotions and they apply for the maximum loan possibly provided by a bank which is usually a jumbo mortgage and then they just simply buy a huge home with lot of stuff in it and then spend the rest of the lives paying them off in installments. Such cases aside, it is good to own a home and better off buying a single family home in possibly an area which is close to nature and parks and libraries. I don’t advocate constant moving of homes or buying and selling of homes and certainly no flipping. If you have to move places due to job issues then you are better off finding a good property management company and then renting off said location. Living in a rental home has its own benefit .. major one of which is no maintenance and ease of moving to a different place later on. There is a massive debate on home vs rent. I think it is good to own a small home and then maybe rent it out and you could rent a home yourself or if your job is nearby, just stay in the home and enjoy some time there.

Beware of Leveraged ETFs – they are designed to go down over time. Just stay off them. Do yourself a favor and just delete any people or articles which talk about this. I turned down this noise and found that there is a pattern in the world of finance where people showcase one perspective and emphasize them till you say yes to it. It is pretty much similar to selling. Except that this product was never designed for you or me in the first place. Buying this product for even an institutional investors are a tough game and are outright banned in many pension companies as well as big investment firms. It is kind of illegal too and has a shady component in the way prices are reset.

Fanyboy approach: Believe it or not this things work. There are people who are companies fanboys. An example which I did a case study on and wrote a paper in my academic thesis was Apple. It is an understatement to say there are people who exclusively just prefer Apple products. Sometimes this fanboy mentality extends to their stocks. People who might not know anything about statistics might just use their emotions to buy Apple stocks and keep adding to it. In recent years, there has been no stopping Apple stock in its run to become the most valuable company in the world. Such people have hugely benefited from this run and they have seen their portfolio multiple several times in size. Astounding as this is, some of them are in for just apple and don’t sell at all. Result is they are sitting on massive gains. So you know, work with something that lets you sleep well at night and the product or strategy that you understand pretty well.

Another such group is the dividend payers. Usually migrants from the bond world or new entrants from the bank world who are used to CD interest rates. They want steady flow of money like the retirees and don’t want to be bothered with the daily fluctuations or want to sell daily. They just want to put some principle in a good basket of stocks and then get steady income off it. Dividend stocks buckets usually contains REITs, utilities, consumer stocks and blue chip stocks. Dividend payout is one of those thing where you do not want to invest in a company that is paying off huge dividends just like you do not want a company with massive fluctuations.

How do I sell? The types are market or limit mainly – do either of these which you are comfortable with. With easy availability of apps, market is easy to implement. I also use limit at times to just have a better limit rate. There are of course other options like stop and stop-loss etc. It all depend on your order type and more importantly your level of comfort and time available.

The way the market is structured and the stock priced or the bond priced, it is obvious that YOU do not matter way too  much. In fact you are coming very late for this party where the price is already high and you are essentially getting the smaller gains. Of course, stay for the long-term and you are going to reap rewards. Places like Google or Facebook comes into mind. There is no point in putting way too much emotions in your investment. Dont see this as an extension of yourself or take it too personally. There is a difference between passion and personal. You can be passionate, understand your limits and outcomes and make an objective decision on the holdings. Tax loss harvesting is one variable in your equation or one tool that you have. A bigger thing is do you really want to sell this stock? Think objectively. A tax loss harvest will butter some of those losses but still you lost on a deal. The best outcome is always profit and then redeploy the profits to make more profits. This cycle is of course tough for all which is why data points that index funds often outperform the active funds thus making the case for investors to just invest in index funds. That is of course one of the strategies. Maybe core but not all of it. There are still fund managers out there who beat it. Consistently. Now if one of them gives you a  good cut and a low expense ratio, then yeah go for it, otherwise manage it on your own.

Quick explanation of things ..

In this post, we just see some of the terms that are there and would be thrown out by many “experts”.

Loss aversion: the principle of hesitating to book losses out of fear that it would be a judgement on you that you failed in your guess or research about a particular stocks.

Tax loss harvesting: book losses and then deduct that from your adjusted gross income in the tax year. A way to buttress your losses that is all.

Technical terms from statistical world such as P/E ratio ( generally lower is good and higher mean it is expensive), beta ( low means low risk ), variations, technical indicators predicting movements, various other self-explanatory measures, employee numbers and so on.

Should I sell the winners and book profit and stay with the losers? Or stay with the winners and sell losers and put their money in the winner? A combo of such strategy would be good rather than one or the other?

Index funds have their own virtues. They can form the base of your portfolio but you need to have your own stash of individual stocks too. I would say on a 100k fund, 15-20% cash for future opportunities, 40-50% stock index funds, 10% stock and balanced active funds, 10% bonds, 10% your own individual stocks and rest again in margin cash. Maybe as time goes and if you have confidence up the individual stock to go to 20-25%.

It is better to own niche. There are people out there with strong knowledge in the technology sector or the oil sector or the real estate or finance sector. They play only one sector and do it well while the remaining sectors can be handled via the ETFs. For instance, consumer discretionary or even staples consumer sector is one of them. There is constant consolidation and horizontal movements in this sector. It is better to hold this sector in ETF format which also frees up your time to do something more worthwhile than dwell in the stock world.

Some blurbs that I gathered from Money CNN and WSJ over time, sorry it is unformatted:

“Be humble,Take calculated risks, Have an emergency fund, Mix it up, It’s the portfolio – asset allocation, Average is the new best: The best way to own common stocks is through an index fund.–Warren Buffett Practice patience, Don’t time the market, Be a cheap skate, Don’t follow the crowd, Buy low, Invest abroad, Just do it, Borrow responsibly, Exit gracefully, have a planning for unforeseen” or “unexpected things in life” or “life curveballs” bucket in your plan or group of funds. you can’t plan for them so hope for the best but prepare for the worst… invest in yourself. live below your means whenever possible : frugal but not deprived usual things like plan for unexpected, or atleast keep some money on the side, be an investor and not gambler, never stop being a student.”

Keep expenses low is the mantra of the index fund and their main selling point. At this point, there is nothing to combat it and you are better off owning some index funds as they are also there in your retirement plans.

Have your own stock screeners at places like Google Finance, T Rowe Price or Fidelity. Fidelity is awesome when it comes to stock or mutual funds research. Indispensible I would say .. just like T. Rowe Price.

Have your own stock cutoff price. As in I never buy stocks under $5 or something that is over $1000. Now I know this is relative and stock price has nothing to do with value of the company or this should not be a core decision. But I just feel uncomfortable with penny stocks. So look for your own comfortable points and your structures are essentially made of this. But have flexibility. So if I were to find a stock which has done stock joins and hence the price is over 2000 and they just want less volatility in this stock but I find said stock to be a good long-term buy I would still buy it.

I used to dabble in all kind of stocks. Big, medium and small and used stay away from known names but look at obscure ones. You see, I thought I would be able to find some small company and then heap the rewards as it transforms itself into a mid-sized firm and then to a blue chip behemoth. Yeah, that is possible but that takes some years. But in 2000s and mid 2000s there were many companies which went big rather quickly. Apple went from near bankrupt in late 90s to the most valuable firm in about 10 years. Same with Facebook or Google or many tech firms. I tried to do this with some oil firms or industrial companies. Then I have learnt that this does not really pay off very hugely. Once time is better spent with concentrating on a small sector and small amount of stocks.

Also remember, that stock and public investment is not the only way. There is also private equity and the large private investment sector though parts of it are opaque to the general public. For instance. Geico is owned privately by Berkshire which is a public owned firm. You can invest in a Geico only thru Berkshire shares.  So maybe earmark a portion of your portfolio for secondary market or private market where you can directly put the money with a company rather than thru some banking intermediary.

To be continued …

Identity management

Taking a break from the world of stocks for a moment, I think it is important to have a good handle on identity management. In these days, everyone has a ton of accounts – banks, email providers, social media, retirement accounts, college accounts and shopping accounts. No matter what encryption format is used, it is all ultimately crackable. And the point is not to make it hard for the thieves, it is to make it easy on yourself. Try what works best for you, maybe write it in your own diary and hide it under your carpet. Learn Indian or Native American languages such as Navajo or Sanskrit – you get the drift — old obsolete languages that no one remembers or teaches and write them down and then of course put them in your desktop or front room as there are few chances any one will be able to crack these codes in first place.

There are a lot of online password protection tools .. where you put in a catch phrase and not password that you might only know .. something deeply personal such as you going to this music band and dancing to this song. Based on this  catch phrase then you can unlock all other passwords for various sites. I do a combination of such things and also use one encryption and phrase password tool like TrueCrypt or many such free and open source solutions. It is not a bad idea to invest in this or pay few dollars every month if that leads to some peace of mind.

I also put tax forms and statements in this. I usually compare Turbo Tax, Tax Slayer, local state government websites which often allow you to file for free, That is another good practice and you get to see various codes and get a picture on how different softwares are working your income and expenses. I then take the one with the maximum refund to file.

Laying groundwork III

Some few things that you need to follow are:

1. When you leave jobs, first secure your 401k->Rollover IRA. Generally contribute some money, what ever you can to your roth/traditional ira or HSA or 529s.

2. You can invest via systematic plan where you put say a $100 per month or lump sum of $1000 at the end of year.

3. Rebalancing is something that you do periodically – either a designated time of a year like an anniversary. If you happen to read something in news, then think that it is a good idea to rebalance then that is also a good time to rebalance your portfolio. So what is rebalancing? I like to keep it simple by putting in 50% stocks and 50% bonds. For some folks, it is 80% stocks and 20% bonds. Now suppose, stocks have a huge run and you are now 60%  stocks and 40% bonds you book some profit in stocks and move that to bonds to bring it back to 50-50.

4. Tax loss harvesting : As said earlier, it is just a tool and not necessarily a core strategy of your investment. It is more like – Hey, I messed up but might as well book some tax losses and get some deductions there by declaring it in taxes. Once I get that money, I might put some money back into same stock and maybe put the rest in some other promising stock.

5. There are tons of momentum and hot stuff that will come always. New ideas and strategies and new forms of old ideas that are rehashes just like movies coming out every summer. Don’t get sucked into any of those. Enjoy the oceans, travel, art, read a book or what not.

6. Dividend investing: That is one old form of investing in which you invest in utility stocks. REITs are also good dividend payers. Always keep some money in this bucket.

7. Buy low ranges and sell high ranges: I kick myself in the back for not buying Apple when it was in the 30s and 40s in the 2008 stock market. It went up like crazy after that. I bought some then and sold them.

8. How much hold? In buy and hold, typically if you buy something for 100 and see it become 200 and then back to 100, one wonders what is the point of the buy and hold strategy. No one can call 200. So maybe you are lucky to call a 150 or a 180 or at best a 195. What to do when you call 150? Plough down more thinking “your stocks has got some legs” or “she will tank any moment now?”. Volatility and gyrations are part and parcel of the market. Hence the play in ranges are good. YOU have to figure out how much time and more importantly mental space one has to devote for such things. Work and family are way higher priority compared to finance – especially stock market trading unless of course you work in wall street. Even in this case, you are so heavily regulated that you can’t just act on your own whim.

9. A good idea would be to have a bucket list of stocks. I rejected DOW and some chemical companies because I don’t like their business and I would be invested in them via ETFs or mutual funds on which I don’t have control over, but on my own I will never invest in them or a GM stock such as Monsanto. I am not a fan of genetically modified foods and think of it as unwise application of science. There are many financial stocks where I have my own discretion. I don’t put more in banks now while I have always stayed away from Goldman Sachs etc. I do like insurance sector but stay away from certain names there which are very concentrated stocks.

10. Institutional investing is a good sign. Much more than the beta and P/E I like to see how much % of stocks are owned by institutional investors. Not having family owned or human controlled and relying more on institutions is generally a welcome sign for me. You might have your own such principles and convictions. List them out as above and add them and this will form the basis of your investment.

An average investor in the US will easily come to the tune of a million or more – counting your home and possibly a rental, your 401k over life time and IRAs and medical accounts. A million is not a small amount and if invested wisely, you are looking at comfortable secure retirement. At the very least, you need to attain a good degree of financial independence. FI is good and cool and gives you the freedom to help others, pursue what you truly like, pursue arts, power to say no which I think is one good thing about money.

Laying groundwork II

In continuing the haphazard and dis-organized nature of posts in the initial part of this story, I would continue here on the basic strategies of investing. In the last post, we looked into basic accounts and not to get caught up on semantics and rather to open a few accounts with your local brokerages as long as the commission is low. Fees and commissions being low are very good. However, they are also diversions and you don’t want to miss the forest for the trees by looking into just fees and commissions and in general the price aspect of the trading and investing.

Trading of stocks have some basic philosophies and each camp have their own drum beats. How many stocks to keep and hold? Detached and unemotional way or some emotion is good? Buy and hold is a very common approach. But hold a turd for how long? Those of us in the 2008 financial crisis know this by holding the finance stocks which have still not recovered in the subsequent bull run till 2015. Some banks and finance stocks are decently up. But one might not necessarily agree with their way of doing business. I generally take a balanced view of things and not extreme views when it comes to business. Basic differentiation is a right of every business but to just outright keep competition at bay by using unfair practices is kind of under belly of capitalism. A bad practice of capitalism.

Some of the major philosophies are those of:

1. Buy and hold: Long term investors prefer this where they buy say a stock of a local utility company and hold it for the next 10 or 15 years. Up or down, they swing with it. Buffet writings echo this and have some concentrated stock portfolio but they also got this stocks at lower rates, get good dividends while not paying dividends  to their own company’s investors. At the time of this writing, Berkshire H investors don’t have dividends. Also, they have access to some instruments and preferred dividends which the common investors like you and me don’t have. So all in all, while this is one cornerstone of philosophy, let  this not be the over-riding factor.

2. Buy low and sell high: Easy to say and difficult to implement as it is tough to predict market timings. But this combined with the momentum trading is a good way to ride when the market are high.

3. Momentum trading: You keep a stock in sight such as Apple. It is in news and people constantly know what is going on. Has a good amount of liquidity and trading volume in the exchanges. So you buy them when it is said a 100 then sell it as soon as it hits 105 and then again buy when it comes down or just buy it back at 110 and then sell it off on 115. The downside is sometimes it also goes to 90 or 85. Then what do you do?

4. All in Active trading: For folks who have access to no commission trading due to large account balances, they just keep booking smaller profits  … kind of like surfing … or as they say in NFL, keep taking the smaller scores by rushing 10 yards at a time. Once in a while, you will get the good stock with a definitive edge and then you ride it.

Most people do a combination of all this. Big people mistakes too. Berkshire did such mistake with COP shares. What do you do once you realize there is a mistake. Swallow pride, book losses, and harvest the losses by reporting them as tax loss? Tax loss harvesting is pretty much point where you have given up on your own convictions about the particular stock that you are holding. One could of course buy the same stock at lower price and hold it. But like a complicated interstate freeway system, you also have an option to renew this money and invest it in fresh, new stocks and then see it go further.

Point is do not get tied up to any of the above or any  other philosophy out there. In the finance world, the king is the cash. The bank which is pretty much printing the cash is the king. So have plenty of cash handy. Remaining everything is just commodity. Whether you, your company, your idea or project or product or service or group or inventory of commodities and a massive group of resources are nothing but commodities. In a way, having some unemotional bond towards your investment is a good strategy to co-opt. Patience is a good ally.

Laying groundwork

The world of finance is really confusing from outside. But really it is just human beings like you and me on the inside. They have their own flaws, notions, ideas, homogeneity, cohesion and apply to the basic nature or the general human nature. Really, it is one window or view of the state of the human society. In a way, it is just an amazing picture of the kind of things that happen in the world. It is definitely a worldly thing, a materialistic thing but then rather than dig deeply into philosophical aspect of thing, let me tell that there is nothing spiritualistic or philanthropic about such things. In the grand scheme of things, money buys time and is an essential thing is today’s society. But one has to be just careful to consider the costs of acquiring and investing said money. Hence, we would discard the illegal investments even if they were to return us higher return of investments :D.

As previously said, at this point of time, we will also not pursue much on Forex and Derivatives. Both are instruments for the very very big investors with more than a billion to invest and with heavy amount of disposable liquidity like governments and agencies. So sticking to just stocks and bonds, debts, the main instruments that are available are your friendly credit unions, CDs and savings accounts, investing in real estate thru your home and rentals, stocks, bonds thru brokerages and mutual fund companies. It is imperative to have some sort of accounts with the Vanguards, Schwab or TD Ameritrades. Many offer to trade their own ETFs or mutual funds for free. Have some accounts opened under your name for the IRAs – Traditional and Roth; 401ks, Simple IRAs, Rollover IRAs as soon as you leave your job to the next one, 529s, HSAs and general taxable accounts. Now all the big hitters or rather the funds that you think will appreciate well such as REITs, stocks etc will stay in tax-advantaged accounts such as IRAs while the slow growers stay in taxable account. That way you are not holding off a big bill come tax time.

So don’t overthink such things, just open some accounts. Practice with some play money and maybe put 5000 USD in couple of them and buy basic, brand name stocks from DOW Jones Index. This will give you a feel about the funds. It is just like driving your car and getting a grip. You need the first car drive to be smooth and you take in simple places and in a predictable fashion. Explore your own mentality and feelings and emotional level, risk feel etc. Don’t take this as a be all end all. You change. The market will change you. Time always changes human beings. There will be a lot of learnings ahead telling no active management or active trading and just stick to index funds. Now, everyone start putting in index funds, the market will become inefficient by definition. Maybe, come up with your own index. Along the way, you might not agree with some companies – don’t agree with them on environmental policies, their strategies and goals, their growth practices and the way they are, the stories and associations you have with them. For instance, if you are in the computer industry, many folks like Linux and dislike a Microsoft or Apple. No matter what or how much return is, one might not invest in them. Which is fine. Invest what you are comfortable with. Your principles and you matter. Money is just an extension. Similarly it is perfectly fine for individuals who slug it out in the private sector and not have the security and buffer or pension from those in the public sector to crave some security and instead want to put money in cash or just CDs. Totally fine and this is what the point of this blog is. It is not just another money blog. It is not another finance blog. Those info will be always available in government sites and whole tons of other blogs. This is about finance philosophy and how that drives what we invest and where we invest and what stocks we invest and what strategies we follow.

My approach for the accounts are rather have a sprawling set of them than having one shop for all your investing needs. Some names that are quite common in the trading world are the Tradeking, zecco, TD Ameritrade, ETrade. I have been exploring the Level 3 which helps you buy fractional shares of brand names companies. Similarly, there is no harm in opening multiple types of accounts especially at the time of this writing when we have 0% savings rate for about 5 years running now. For most part, the online savings etc. give minimal APY in the US where the liquidity is available in plenty for the businesses.

Some Basics …

There are tons of info on the types of accounts out there. So I will simply blaze thru them fast assuming you have read some of those, visited some websites, wikis such as those related to Vanguard, Fidelity, Boggle heads and about 10 big books speaking 10 different philosophies each of which are cornerstone of a major market like the US ones. Dont get too bothered on the semantics like NYSE or NASDAQ or any such stock exchanges – they are just places – electronic or offline where money changes hands. I will also steer away from Futures – I think they are pretty close to the gambling tendencies such as betting and contemplating rather than making an informed guess. Fundamentally there is a component where the outcome is manipulated or follow inconsistencies beyond what would constitute as investing or banking one’s hard-earned money. Options are fair game and can be used as a risk management or hedging tool. But right now, I am steering away  from Options too as I think they also have a betting component. There is a certain detached action associated with investing in such instruments or derivatives or similar kind investments. They also come in various forms presented to the naive investor in the form of Inverse ETFs or similar stuff.

Bottom line: I look at the debt model. I loan a company, a product or a project some money and expect timely interest payments and full payment on principle after certain years. Similar to what your local credit unions does. Now, add an ownership component and you have stocks. So basically I will focus on stocks and bonds, mutual funds and ETFs. I used to actively trade once upon a time. There is simply not too much for a retail investor to make in this route. Yeah, I did have about 20% + returns at times but I think one is better off this is a strategy that is applied when there is large-scale amount in picture. Also, most big managers or hedge fund folks that capture imagination of 20s and 30s are essentially people who are making money off the fees rather than hitting a homerun. The money in most developed market like US is saturated and you have recent IPOs who might have a real world evaluation of 20s but are propelled by big players to keep them in 60s by actively buying off pools of shares. Of course, some MBA from Harvard will try to put a noun and spin on it so that it is not known as manipulation. Those stuff aside, without getting overwhelmed by lot of stuff from the finance bling bling world, the  most important things to consider are the writings of Warren Buffet in his annual letter. The archives are there in the Berkshire website for free download. A bunch of books like the “Random walk down the wall street” or some study showing that the monkeys make better fund managers. Must read for any one, beginner or veteran needing a constant reinforcement in their beliefs is the writings of John Boggle of Vanguard. I will go over their philosophies and differences in subsequent posts.

New cards from Citi with good sign up bonuses

From the start of 2015, Citi seems to be very intent in coming up with new and creative offers. The marketing strategy has been to use big bang offers to attract the new as well as veteran crowd. Like last year, when they came up with a 100,000 bonus offer for a Citi American Executive card, this year they did something similar with the Citi Prestige card. Note that both cards have very high annual fees, about $450 which is not waived for the first year. Yet, note the high degree of interest and applications that these two cards have generated implying that if you put a really good product out there, people might come out to buy. I am still on the fence as to whether to quantify this as a good card. I did apply for the Citi American Executive card last year and have more or less used this 100k points in various travel related activities.

Citi Prestige is a different ballgame altogether. My skeptical reviews are here. However, Citi seems to be going aggressive and released better bonus offers for two more cards.

All in all, here are the links sans any sponsorship and direct link to citi website:

1. Citi Prestige card: $450 annual fee, $200 statement credit per calendar year, 50k Thankyou points and that’s pretty much it apart from some fringe benefits. Minimum spend is 3k.

2. Citi Thank you premier card: 50k bonus points after you spend 3k on the card. Annual fee waived for the first year.

3. Citi AT&T card: Now this card is interesting. There is an annual fee of $95, a free unlocked phone worth up to $650 from AT&T is awaiting once you spend $2k on it within the standard 3 months. It is pretty interesting card. I would give it that. I am not a big smart phone user but this card is too hard to resist. A 2k spend is pretty average for  most US households – rent, gas, groceries simply add up to that amount quickly in a month or two. If you are living in big coastal cities, then this is an easy task. It is as if you are going to get an unlocked Apple iPhone 6 or Samsung S6 for under 100 bucks. Not at all a bad deal if you have to get a smart phone quickly.

My order of recommendation remains the above three in the numbered order. Given that there is virtually no other provider right now with any exciting offers, it is rather obvious that most people, new and veterans are applying for one of the cards from Citi. In the first quarter of 2015, given the slow pace of the sign up bonuses, this seems a decent start and no harm in applying for one or two cards that Citi seems to limit per user.