It’s been a while since I posted. I am back! Did you miss me?
Due to a current internship at a financial institution, I won’t post any security related ideas. However, I wanted to talk to you all about something.
How. Do. You. Define. Success?
It is a question I have asked over 50 people in the past five weeks. The respondents’ age range from 17 to about 50, and is in or pursing profession in financial services to journalism sector. The answers are very different, and there seems to be a pattern.
Low range spectrum aged (17-24) people’s responses are generally “money money money.”
Midrange spectrum aged (25-33) people’s responses are generally “being fulfilled.”
Upper range spectrum aged (34-50) people’s responses are generally “being able to care of my family.”
See a pattern? I bet you do. Wait for a second, I said their “responses are generally.”
Some people in all three spectrums of age said “being happy.” Common answers to be happy include family, friends, and career (power and/or money).
How do you define success? I believe there are two different categories of success: Professional success and personal success.
I have achieved a professional success when I enjoy my work and people are able to criticize without being afraid of retaliation.
Past criticisms and experiences from trading to internships are the main reasons my professional success is higher than before. Turning their critical feedback into a compliment has allowed me to feel good and improve.
But then, there’s another question. How do you achieve that professional success? That’s where your goals come in. Ask yourself, “Will achieving my goals help me realize my definition of professional success?”
I have achieved a personal success when my quality of relationships is high.
Past criticisms and life experiences from in-depth conversations to heartbreaks are the main reasons my personal success is higher than before.
Once again, there’s another question. How do you achieve that personal success? That’s where your goals come in. Ask yourself, “Will achieving my goals help me realize my definition of personal success?”
Does professional and personal success intersect? Yes. If one is missing, you might not feel “fulfilled.”
Which one is more important?
Does your professional success depend on your personal life?
Does your personal success depend on your professional life?
The answers are different for everyone. It is up to you to determine for yourself. I cannot define them for you because it comes from own experiences. It is possible for my answers to the questions to change anytime.
Forgive me, Father, for I have sinned. I invested in a sin company, specifically the Big Tobacco.
Over the path month, I have been researching consumer goods companies. Initially, I believed I was going to invest in a recession-proof company like Procter & Gamble (PG) or Clorox (CLX). Not even close. I’m going to be a bad boy, set aside the social responsibility consequences, and invest in a sin stock. As Gordon Gekko said in the famous “Wall Street” movie, “greed is good.”
In 2017, I focused less on a personal forex portfolio, and more on other portfolios as capital deposits in the latter reached the same amount as the personal FX portfolio. In this post, I will be discussing three currency portfolios; active trading strategies, carry trade strategy, and cryptocurrencies.
Active Trading Forex Portfolio
Since inception (09/29/2015, I actually started trading in 2011), personal forex portfolio is up 33%. For 2017, it returned 8.39%. For 2016 and 2015, the portfolio returned 32.82% and 117.48%, respectively. So why the big differences in percentages since inception and yearly returns? More money was deposited into the account over time. As a result, I have risked much lesser capital per trade. The portfolio size is 10 times bigger than it was in 2015, or 100 times bigger than it was in 2011. Thus, the returns in % terms are much smaller, but in nominal amounts, much bigger.
In 2017, the maximum drawdown was almost 7%. When the drawdown increased 2% in a week in the middle of the year, I knew I had to change certain positions. 2% move in a week was a big deal considering I was focused less on the personal FX portfolio. Once I closed certain positions and opened new positions, the drawdown went back to its average of 3.5% within two weeks and stayed below that level since then. Risk management is very important!
I don’t have other metrics, such as monthly returns, standard deviation, and Sharpe ratio, as I did for 2016 because the ex-broker who provided me with the useful statistics was banned from the U.S., for defrauding customers and engaging in false/misleading solicitations.
Carry Trade Forex Portfolio
During early 2017, I wanted to create another forex account solely focused on one strategy. I didn’t want the carry trade positions mixed with active positions. So I opened an account with a different broker, Oanda. I initially deposited about 4% of my capital, amount I can afford to lose.
I made some mistakes in the beginning. The first trade was shorting EUR/TRY, whose interest differential is the highest, A.K.A higher yield. I started to lose a lot of money as the only carry trade in the account kept going in the opposite direction of my favor (EUR/TRY kept rising), talks of ECB tapering its balance sheet appreciated the euro and the situation in Turkey depreciated the lira.
Within several months, my unrealized losses were about 30% of the portfolio. I couldn’t do anything about it to manage the risk as my hands were tied due to work. I had to set up the carry trade portfolio in a way I barely have to worry about the fluctuations in unrealized P/L. When work ended for the summer, the portfolio drawdown was its highest, almost 50%.
I learned that the key to successful carry trade is to leave plenty of margin in the account for the pairs to fluctuate without wiping out your account. So I deposited 1% more capital into the account to prevent margin call. Immediately afterward, I changed my positions. I shorted some of the highest yielding currency pairs with negative correlation to EUR/TRY. Within a month, the drawdown went from 50% to 30%. Currently, it is just above 20%. Risk management is very important!
For its first year, the portfolio is up 14%. The 14% comes from the interest returns on the positions as it rolled over to the next day. However, when the unrealized losses are taken into account for 2017, the portfolio is down 23%. Carry trade is a long-term trend following strategy that requires patience and risk management.
This is an instance of humans thinking they can do something well, but things go sideways when they put their actual money, relationships, etc. at risk. I initially believed I could make some money easily with the carry trade. When the time came to have a real money at risk, I made mistakes and learned a lot! This is why I won’t be overconfident in things unless I actually have a good experience in it. Not just for professional life, but also for personal life.
Ahhh. Cryptocurrencies. The hot talk of the moment. Like everybody else, I’m up big time. I started buying cryptocurrencies in July. As of this writing, the portfolio is up 143%. I know I know, 143% is nothing compared to the actual returns of the cryptocurrencies. I currently hold Bitcoin (BTC/USD), bitcoin cash (BHC/USD), Ethereum (ETH/USD), and Litecoin (LTC/USD). If all the cryptocurrencies were to drop 99%, I will only lose 5% of my capital and continue to live as usual. To clarify, I’m not actively trading them.
I bought $ETHUSD (Ethereum) between $135.79 and $142.98. Still holding it. Might buy more (will be tweeted live). Not sure about bitcoin yet
Let’s get to the ugly truth. Since inception (July 2014), my passive portfolio is up only 2.18%, 19 times less than the market return during the period. For 2017, the portfolio returned only 3.82%, 6 times less than the market return. Um….um….um, let me try to justify the low returns.
My peers and people jealous of me would be laughing like this:
When I opened the account in the summer of 2014, TD Ameritrade gave me 2 months to trade for free. So during that time, I wanted to fill the account with stocks. The only problem was I did not know which stocks to buy. At the same time, I did not know how to research potential investments.
Mostly guided by “expert” recommendations and positive headlines, I bought some stocks which destroyed my portfolio, including Ford (F), J.C.Penny (JCP), Cisco (CSCO), General Electric (GE), and General Motors (GM). In 2015, I still did not know which stocks to buy. I wanted to do my own research. I decided to research all the stocks that were bought the previous year.
From my research, I found CSCO, GE, and JCP attractive. So I decided to keep them in the portfolio. I even wrote about CSCO and GE on the blog. I did not write on JCP as I was not profoundly convinced. Funny thing is I have never shopped at JCP, just at its competitors. Even my mother did not like J.C. Penny.
I did not like F, yet I decided to keep F in the port because it was not worth getting rid of them at $10 commissions. For GM, I was on the fence. In addition to these names, I decided to research new names and bought some of them. 70% of my portfolio was in cash in January of 2015. In December, it was 42%.
The new stocks I bought in 2015 were non-dividend yielding risky names, such as Bellatrix Exploration (BXE), Twitter (TWTR), and GoPro (GPRO). All of which did not work out well to this day. BXE, because I tried to find a good energy company at the time every energy companies were distressed. I’m very active on Twitter and use GoPro most of the time. So I wanted to invest in them. At that time, I thought Twitter would get acquired, and GoPro management would start to turn things around, and the Karma Drone would be positive for the company’s financials.
In 2016, I continued to research new stocks. However, I did not invest in any of them. I deposited more money into the account during that year. At the end of 2016, 82% of the portfolio was in cash.
I always found real estate interesting. Used to read about them. My interest in the real estate market skyrocketed after my first ever internship, at a small real estate firm. In January of 2017, I decided to buy WPC, a Real Estate Investment Trust (REIT). During the year, I also bought Verizon (VZ). I did not want the remaining cash in the port to sit idle. So I decided to purchase free commission based short-term bond funds, very stable dividend yielding cash parking (and one high-yield ETF). At the end of 2017, 17% of the port was in cash.
Over the past month, I have been researching consumer goods companies. I’m looking to add one to the port. When I do, I will be sure to write about it.
I’m currently holding 10 companies; CSCO, GE, GM, BXE, WPC, JCP, F, TWTR, GPRO, and VZ.
All shares of 10 different companies belong to 1 class: domestic equity. 62% are in large cap., and 38% are in mid-cap.
On February 16, 2015, I recommended going long Microsoft (NASDAQ: MSFT) when the share price was $43.95. Since then, it is up 101%*. I made a mistake of not buying when I wrote about it. “Put your money where your mouth is, Khojinur.”
On April 12, 2015, I recommended going long General Electric (NYSE: GE). Since then, GE is down 33%*. Dividends are automatically invested in new shares. Average price I paid for the shares is $26. I’m down 29%. Despite the 50% dividend cut recently, I’m staying with the stock for two reasons. The cost-cutting will be the best bet for us the shareholders. The $7 commission fee won’t be worth it, especially since the stock was bought in 2015 when I had less money. If I can open second Robinhood account, I’ll transfer from Ameritrade to the free-commission based brokerage.
In the summer of 2015, I wrote about CSCO (part 1, part 2 AND 4Q FY’15 earnings report). Since the first article, the networking giant is up 44%*. Average price I paid for the shares is $25.11. I’m currently up 57%.
On November 21, 2015, I wrote my first article on LLY and believed it was overvalued (it still is). Since then, the pharmaceutical company is up a mere 1.25%*. The second article on LLY was posted a year after the first article. I personally am not short the stock as I cannot short.
On December 26, 2015, I recommended going long GoPro (NASDAQ: GPRO) and believed it was a buy. Since then, the action camera maker and I are down whopping 59%.
On January 20, 2017, I recommended going long W.P. Carey (NYSE: WPC). Since then, the REIT is up 11%*. Average price I paid for the shares is $61.44. I’m currently up 10%.
On May 9, 2017, I recommended going long Verizon (NYSE: VZ). Since then, the telecom is up 46%*. Average price I paid for the shares is $46.05. I’m currently up 47%.
*dividends not calculated
Estimated the portfolio dividend yield is 2.48% (that is very similar to the 10-year yield), with largest being 6% and lowest 0%. I plan to increase the portfolio dividend yield by getting rid of non-dividend yielding stocks and/or buying dividend-yielding stocks. That will happen fast, if I can make second Robinhood account and transfer the portfolio to there.
When I started doing research in-depth and writing down my findings and thoughts, everything started to improve. Writing is powerful!
Every new trade and investment will first be announced on Twitter. Almost always!