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Trading idea- Based on Graham (TSX)

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Newbie
Dec 15, 2010
4 posts
toronto
Hi Rod,

Thanks for all your hard work and dedication for this thread! I have been reading each posts to understand this model better. I'm on the 60th page now and I haven't seen anyone post my question.
I know this is a trading model and you had mentioned that this is used to fund your "wants" and not your "needs".
My question is when do you take money from the portfolio to get what you want?
Things I thought of:
  1. Wait till the overall portfolio grows to a value that meets my risk appetite, e.g. +20%, liquidate the entire portfolio, take the gains to fund my wants, and invest the capital back into the model
  2. When a position exists the model with a realized gain, take out the gain and just reinvest the capital back into the model
  3. Rely on the dividends coming from the model to fund the wants and let the model grow to as much as you can tolerate
Props again for what you're doing!
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
6081 posts
6956 upvotes
carisale wrote: Hi Rod,

Thanks for all your hard work and dedication for this thread! I have been reading each posts to understand this model better. I'm on the 60th page now and I haven't seen anyone post my question.
I know this is a trading model and you had mentioned that this is used to fund your "wants" and not your "needs".
My question is when do you take money from the portfolio to get what you want?
Things I thought of:
  1. Wait till the overall portfolio grows to a value that meets my risk appetite, e.g. +20%, liquidate the entire portfolio, take the gains to fund my wants, and invest the capital back into the model
  2. When a position exists the model with a realized gain, take out the gain and just reinvest the capital back into the model
  3. Rely on the dividends coming from the model to fund the wants and let the model grow to as much as you can tolerate
Props again for what you're doing!
Thanks! Besides trading this model, I also trade my other stock models, options and crypto. So if I need income to get something that I want, I either get from my dividends or from my investments (typically from growth investing as they are more volatile). I only sell a portion of my trading models when I rebalance, so if my trading models had a good year, I sell a portion to invest in dividend or growth stocks.

When I sell a portion of the trading portfolio, I do it in a way that it respects the same weight allocation in the end. I don't simply sell one stock or another from a trading model, I sell a portion of all holdings on that model maintaining the proportional weight of the model (since the other models have a weight allocation based on risk and other factors). I only rebalance if the models are at decent profit, otherwise I leave it until it grows again. I typically do the rebalance in April, which is historically the strongest month of the year.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Newbie
Dec 15, 2010
4 posts
toronto
or from my investments (typically from growth investing as they are more volatile
Since you put a big emphasis on trading versus investing, I just wanted to double check with you on the above.

I assume you actually mean trading in all of them since I think your main investing play is your DGI portfolios. If my assumption is correct then it would be:

1. Graham Trading
2. Other Stock Model Trading (Dividend and/or Growth)
3. Option Trading
4. Crypto Trading

You use #2 - #4 to fund your want and you also take a look at your trade models holistically to see whether they have made good gains and sell a portion to invest back into your investments.

Context behind my questions: I have a good chunk of money that I want to put to work so I'm trying to figure out what I should be trading on and what I should be investing on. In reading through your posts, I think you are very knowledgeable and have a sincere interest to help other people so I would like to understand better your overall financial plan. In short, I admire you and want to be like you :)

I've also started reading your website to get to know your trading/investing principles better.
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
6081 posts
6956 upvotes
carisale wrote: Since you put a big emphasis on trading versus investing, I just wanted to double check with you on the above.

I assume you actually mean trading in all of them since I think your main investing play is your DGI portfolios. If my assumption is correct then it would be:

1. Graham Trading
2. Other Stock Model Trading (Dividend and/or Growth)
3. Option Trading
4. Crypto Trading

You use #2 - #4 to fund your want and you also take a look at your trade models holistically to see whether they have made good gains and sell a portion to invest back into your investments.

Context behind my questions: I have a good chunk of money that I want to put to work so I'm trying to figure out what I should be trading on and what I should be investing on. In reading through your posts, I think you are very knowledgeable and have a sincere interest to help other people so I would like to understand better your overall financial plan. In short, I admire you and want to be like you :)

I've also started reading your website to get to know your trading/investing principles better.
Thank you for the kind words. First, to clarify between trading and investing, since these are often used interchangeably, but they are meant for different purposes:

In a nutshell:

Trading:
- Meant to lock profits in a short term;
- No partnership with companies; stocks are pieces of papers to be bought and sold based on trading rules (which can be based on technical analysis, fundamentals or both);
- Reducing drawdown is important; Traders care if a position is temporarily down because trading usually involves momentum, to ride the immediate trend.
- There will be many closed positions at a loss, by design.
- Technical analysis is important for successful trades.

Investing:
- Meant to lock profits in a long term, if ever - some strategies are not meant to sell if possible.
- It’s a business partnership. Stocks are companies and you own a piece/ share of that business, and should be bought based on quality and valuation, which drives operating returns overtime - stock price follows business results overtime.
- Reducing drawdown is not important. Investors should not care if a portfolio is temporarily down because it’s meant to hold for a long time. Furthermore, the price of a stock not always reflects the fundamentals and true worth of a business.
- There should not be many closed positions at a loss. Except in extreme times (once at every 10 years or so), the majority of holdings should be at a decent profit if chosen with quality and valuation in mind when you look at the whole portfolio.
- Technical analysis is not important for successful investments.


I use 2 investing strategies: dividend growth investing (to live from dividends) and growth investing (to maximize capital appreciation by investing in growth stocks, companies that are growing fast and reinvesting most of their cash flow back into the business). Different strategies, for different purposes, but these are all investing strategies for the long term. This is not trading.

Then, since the goal for investing is to be capitalized and not sell proceeds if possible, I rely on different trading strategies to come up with capital for the short term. There are trading strategies focused on growth, focused on income, done in other assets and derivatives, these are all different trading strategies.

So first you need to determine if a setup like this makes sense to you. Figure out the “what” first, then you dive on the “how”. Timeframe is the first criteria to determine what gets allocated for the long term, based on your goals, risk tolerance and effort to be spent. Then you define what tactical allocations and strategies you want for a short term. Once you understand how this is mapped out, then you dive into how to implement that.

It all depends on your comfort level, if you are willing to put the effort to learn something new, and most importantly, have the discipline and temperament to stick to your strategy. Every setup has pros and cons, it’s about understanding risks and managing them. The more you know what you own and why you own, the better positioned you are to take advantage of opportunities and tailor your strategies according to your goals.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Newbie
Dec 15, 2010
4 posts
toronto
Hi @rodbarc ,

Yes, I think this setup works for me.

I'm going to read up on your website a bit more and will have more questions coming.

I think the nature of my questions will deviate from this thread since my future questions would be about your holistic approach to investing and trading as well as the nitty gritty details. Would you be OK with me PM-ing you?
[OP]
Deal Fanatic
User avatar
Dec 14, 2010
6081 posts
6956 upvotes
carisale wrote: Hi @rodbarc ,

Yes, I think this setup works for me.

I'm going to read up on your website a bit more and will have more questions coming.

I think the nature of my questions will deviate from this thread since my future questions would be about your holistic approach to investing and trading as well as the nitty gritty details. Would you be OK with me PM-ing you?
Sure, you can reach out to me via DM or via the website. If you have any questions pertaining to this Graham trading model, feel free to post on this thread so that all can view and benefit from it.


Rod
Build a comprehensive portfolio based on Investing and Trading strategies. Check out these threads and join the discussion:

Investing strategy based on dividend growth

Trading strategy based on Graham principles.
Newbie
Aug 6, 2011
46 posts
16 upvotes
AB
Appreciate all the work you put in to keeping us informed Rod - because of your posts I read the investing segments so thank you!
Newbie
Aug 6, 2011
46 posts
16 upvotes
AB
Nice profit and dividend made LIF thanks Rod. Dividends rule.
Sr. Member
User avatar
Jan 23, 2018
693 posts
885 upvotes
Coruscant
This may not be the correct forum to ask this question, but I'll give it a go anyway.

I have a large unused capital loss to consume, so among other strategies for drawing it down I'm looking for securities that have a larger proportion of their distribution assigned as return of capital rather than taxable dividends. I expect most will likely be REITs, but not necessarily all, and I don't want to overlook anything -- not to mention that some diversification would be welcome.

I could try a brute force approach and hunt down and examine all the potential candidates one by one, but I was wondering if someone else had already been through a similar exercise, or knew of any shortcuts that might be helpful for constructing a working list

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