This week, we asked Wealthy Retirement readers to share the stories of their most profitable trades and trading strategies. We were pleased to hear that so many of our readers had been successful in the market.
Some wins were recent…
“Sold Dollar General (NYSE: DG) today for a 100% profit!!”
“YES. New Oxford Club Member. Up 16% upon your suggestion.”
Others were long-term plays…
“Yes. The trade was on Tesla (Nasdaq: TSLA). The shares were held for two years and sold for a 150% gain.”
“I bought the stock of a company that had some upside potential and sold it when it was about 40% up, that’s all there was to it… I’ll ride that same company again when it’s time.”
Still more readers wrote in to share that they had scored profits on companies in every industry, from shipping ($7,000 profits from UPS (NYSE: UPS)) to tech, precious metals, financials and even jewelry.
And like our readers, our financial experts here at Wealthy Retirement are no strangers to success.
Last spring, Chief Income Strategist Marc Lichtenfeld shared one of his favorite wins from the biotech sector: the pharmaceutical maker AbbVie (NYSE: ABBV), which offered impressive profits both as a short-term trade and a long-term income investment.
On March 6, 2017, when I recommended it, the price was $63.22. At the same time, for investors who really wanted to go for big gains, I suggested the AbbVie January $75 calls at $1.18.
We exited the stock on February 1, 2018, at a price of $112.44, for a total return (including dividends) of 81%.
The options play was even bigger. When we sold that position on January 19, 2018, the calls were trading at $29.28, another huge gain.
But I also recommended the stock for long-term investors.
How to Earn Your Laurels
Earning your spot among America’s successful investors begins with developing a strategy – and sticking to it. Here at Wealthy Retirement, we recommend building out your portfolio with a healthy mix of companies with different market caps, industries and levels of risk.
Be sure to include Perpetual Dividend Raisers and blue chip bonds in order to generate income while your other assets appreciate.
(For a comprehensive guide to getting started, browse through the topics covered in Wealthy Retirement’s financial literacy section.)
Be sure to consider position sizing. This crucial but often overlooked factor in portfolio creation can mean the difference between health and heartbreak for your nest egg.
During the dot-com boom and the collapse of energy magnate GE, many investors learned this lesson the hard way.
Here at Wealthy Retirement, we recommend allocating no more than 4% of your total portfolio to any one position. We also recommend setting trailing stops in most situations, and we suggest 25% as a guideline.
(A 25% trailing stop means that you will commit to sell a stock if it drops by 25% in value.)
In a portfolio of roughly 20 positions, this means that a downturn in any one stock will limit your downside to 1% of your total savings.
This strategy will allow you to enjoy unlimited upside (and sleep at night).
Then, when you’re reaping the benefits of a sound portfolio and have three years’ worth of expenses set aside, you can explore technical analysis and consider more speculative trades.
These include investing in emerging companies and beginning targeted short-term trading.
In Wealthy Retirement, we frequently cover fundamental options trading strategies that you can use to begin claiming short-term profits.
For example, investing in companies with upcoming catalysts, like earnings reports, mergers and acquisitions, and new initiatives, can add a healthy spark to your portfolio.
Regardless of where you are on your investing journey, it’s crucial to make sure that your nest egg is resting on strong foundations.
As we head into the fourth quarter, consider doing a thorough portfolio review and making sure that you’re still on track to meet your investing goals. Then, consider adding a new strategy to give your portfolio some extra spice.
Our readers will tell you – you’ll be glad you did. As one reader wrote to Marc:
Thanks to you, I should be able to retire… relatively worry-free… and that, my friend, is what it’s all about. Thank you for being there for those of us who are a little rough around the edges with our investment savvy but know the value of listening to the expert.