Originally Posted By Jim in Merced CA EXCELLENT scenarios on post #19, SuperDry. That's the kind of advice I enjoy reading. It's easy to understand and more importantly, makes sense. Thank you.
Originally Posted By Mr X >>>So, if you try this, you might want to do so in an IRA account . At least that way you can't get stuck owing taxes on money you have since lost.<<< Excellent point. Having thought about it some more, I'm confident of large gains but I would certainly take some money "off the table" for expenses at some point. Just not in the first couple of years...
Originally Posted By Mr X Regarding the nightmare scenario (definitely a point to consider), I was never thinking of putting ALL my eggs into one stock!! Maybe at the very beginning, but obviously some diversification is absolutely essential (unless you're Bill Gates). ;p The same idea could be split up through a diversified portfolio of 10-12 stocks, couldn't it? Great point about the IRA too, my thoughts exactly. I still think it's possible to generate significant returns investing carefully this way. I'm going to give it a shot.
Originally Posted By SuperDry <<< Regarding the nightmare scenario (definitely a point to consider), I was never thinking of putting ALL my eggs into one stock!! Maybe at the very beginning, but obviously some diversification is absolutely essential (unless you're Bill Gates). ;p >>> I guess this shows that diversification is *always* important, even if you have found a "sure thing" <<< The same idea could be split up through a diversified portfolio of 10-12 stocks, couldn't it? >>> Well yes, but then you've multiplied the number of correct guesses you have to make by 10-12x in order to make the whole scheme work. Doing it in an IRA prevents you from having to come up with money to pay interim taxes as you go along, and of course prevents the worst-case scenario of you getting stuck holding the bag with a big tax bill and no money to pay it. But here's another thing for you to consider: you said that you don't want to wait until you retire. If you manage to get to your $1 million in 5 years, you can then annuitize the withdrawals from the IRA and avoid the early withdrawal penalties, regardless of your age. Basically the way it works is if your remaining life expectancy is X, you can take out 1/X of your money that year without penalty (you still pay the taxes if it's a traditional IRA). You can start this at any age. So here's what you do: once you get to your $1 million after 5 years, I'm sure you'll find it easy to continue on for just one more year so you have $3 million. Then, switch it into something very safe like treasury bonds and draw the annuitized amount every year. You'd have a comfortable income for life. Sounds so simple - I wonder why everyone doesn't do it? I wonder why whoever runs the website that you linked to is wasting time selling $40/month subscriptions on the web on how to do this, when they could be making 300%+ a year actually doing it? When you get rich enough to stop working, be sure you remember us lowly working stiffs back here at LP
Originally Posted By Pongo_Paterfamilias <<<It would be a mistake to not contribute to an IRA just because you were Roth-ineligible.>>> Truer words were never spoken.
Originally Posted By WilliamK99 I have a better idea, invest 3000 in an online Poker account and it has about the same ammount of risk, if you know what you are doing. $100 Freerolls are a fine way to make a living.
Originally Posted By Mr X Playing poker has the same amount of risk as stock investing? I don't think so. >>>I'm sure you'll find it easy to continue on for just one more year so you have $3 million<<< You're mocking me, aren't you?
Originally Posted By WilliamK99 Playing poker has the same amount of risk as stock investing? I don't think so. << IMO, yes, I took a $50 dollar bankroll and made it $1000 in about 6 months playing .50/1.00 games and 10 dollar Sit and Go tournies. Eventually when I get better I will increase my limit and possibily make more money but right now my 50 dollar investment has increased quite a bit compared to your 3000 dollar bankroll errr investment.
Originally Posted By SuperDry <<< You're mocking me, aren't you? >>> That's not the word I would use. Perhaps smiling with you instead of laughing at you would be closer. I'm sure you see the interesting dilemma what you propose: if you can more than triple your money every year, turning $1000 into $1 million in 5 years, there's the obvious question as to why one would stop there: if you continue for just two more years, you'd be at $9 million. What is the rationale between stopping at 5 years and $1 million? <<< What happens if you have a Roth IRA and then start making too much income? >>> You get to keep any existing Roth IRAs that you have, and continue to invest and grow what's already in the Roths. The only thing you can't do is make additional contributions during years when your income is too much. Plus, note that any income made within a Roth account (or regular IRA account) doesn't count as income for that year as far as Roth eligibility, so no matter how much you make in your Roth, you will continue to be eligible for additional contributions unless your other income puts you over the limit. But what I don't know is what the rules are regarding pre-retirement withdrawals from a Roth: can you start an annuitized withdrawal program and still maintain the tax advantage? I don't know. If not, then there will be at least some cases where one might want to use a Traditional IRA even if one was Roth-eligible.
Originally Posted By Mr X I still don't really understand the difference between Roth and Traditional really. >>>if you continue for just two more years, you'd be at $9 million. What is the rationale between stopping at 5 years and $1 million?<<< Sure. It's just the "hype" of that big old "million" (which is just a number anyway, but somehow it's kind of mystical), coupled with the short timeframe and the low investment. It sounds cool, in other words.
Originally Posted By t1lersm0m I believe a Roth Ira, you pay the taxes on the money you put in up front, but you don't have to pay the taxes on the money you earn over the life of the IRA. But with the traditional IRA, you defer the taxes on the money you put in, and on the income. However, you pay the taxes once you start withdrawing from it.
Originally Posted By CrouchingTigger The money you pay into a roth IRA is post-tax money. You've already paid income tax on it. The money you put into a traditional IRA is pre-tax - the government defers collecting income tax on it until you start withdrawing it at retirement, at which point you are normally in a lower tax bracket anyhow. >> Perhaps the biggest fallacy is that getting a 10% ROI a month for 60 months in a row is "TOTALLY do-able." As a general rule, the market is rather efficient at pairing risk with reward over the long term. To do what you describe above would require that you make a guess as to the future price of a stock such that you can make 10% in one month, and that you be able to make this guess correctly 60 times in a row. << That pretty much says it all. I've had stocks that my broker recommended writing covered calls on, only to be "called out" (forced to sell the stock thanks to the call option). I'd rather have kept the stock. The whole idea is great: "All you have to do is buy the right stock, and then sell call options." It's that first part, the "buy the right stock" bit, that's the hard part.
Originally Posted By alexbook >>The whole idea is great: "All you have to do is buy the right stock, and then sell call options." It's that first part, the "buy the right stock" bit, that's the hard part.<< Warren Buffett's advice: Buy a stock, hold it, and wait for it to go up. If it doesn't go up, you shouldn't have bought it. ;-) >>I've also known some who didn't do so well. Now when I see them, they ask me if I want fries with that.<< Yeah, I've known a few of those, too. ----- Not that you can't make a living (or even a fortune) in the market, but it takes a *lot* of work and a *lot* of luck. People I've known who've made a living at it have pretty much spent 40 hours a week researching.
Originally Posted By Ursula I agree with William on this one. Our gaming stocks have taken nose-dives, yet my side investment in a poker player is doing just fine, thank you.
Originally Posted By LuLu I agree with everyone who's said how much work (and a bit of luck) it is to pick the right stocks in the first place. My dad spent the last years of his life "working" the stock market. He did well, but it was like an obsession. I've dealt with the fallout from that: tons of saved stock newsletters, transcribed market reports, analytical figurings etc, plus a house that had fallen into disrepair. It's cool to make money in stocks, but it sure ain't easy. I'm sooo not interested in following in Dad's footstep on this. (And Super Dry, thanks for your insights here, very interesting!!)
Originally Posted By SuperDry Well, Mr X: It's been 90 days. Making 10% monthly with compounding, you should be up 33% by now. How are you doing?
Originally Posted By Mr X Haven't really started yet...as I'm still learning about the market. However, just with experimenting, I've already made a couple hundred bucks selling covered calls. Would have made more, but as I didn't want to lose the stocks I had...I ended up buying back the calls at a smaller profit rather than risk losing the stocks when they hit the strike price (which, actually, they all did). I've done this with Frontier Oil, Nuance Communications, and Baidu.com (Just got out of my long Nuance position last night with a 20 something percent profit...probably gonna jump back in after earnings).
