Frequency of Trades?

[DTEJD1997]

Hey all:

 

Just curious as to how often other members of the board trade.

 

I myself probably execute a bit more than 1 trade per month.  However, there have been 6 month periods where I did not do a single trade, and then one month I might make 5 or 6.

 

I have heard WEB suggest that you imagine you have a punch card with 30 ideas and that when you are done, you are done.  No more investing after those 30 trades have been done.  I think that might be going overboard a little...

 

I could also see myself trading more as my capital base expands.  This would especially be the case in writing covered calls.

 

I've known an investor who only trades a couple of times a YEAR, but I think his returns are frequently lowered due to inactivity.  For example, we have both invested in some of the same stocks.  I pay more attention and I see the situation at a company getting bad.  I get out with a 30% loss.  I contact him and alert him to the situation.  He stays in due to lethargy and winds up with a 90%+ loss.  This has happened more than once...

 

So I guess, I could be perfectly happy trading 1 or 2 times a month, and could probably manage a fair amount of capital.

 

Any thoughts?  Suggestions?

[JBird]

I've been investing for 2 years and have made 8 trades (includes averaging down on a stock).

[mikazo]

I've been value investing for a year this month and have made 4 buys on 3 stocks, which I am happy with. Shortly after my first buy, the stock tanked 10% after earnings, so I bought more. I'm comfortable with my positions and could watch them dive if I had to, especially if the company is buying back stock at low prices, since I know they'd be adding value for me for cheap.

[ericd1]

There are way too many variables involved to answer your question. What type of portfolio do you have--concentrated, widely diversified, etc.?  Do you average in and out?  All have a bearing on trade frequency.  An investor that knew what he was doing at the start might be able to use Bufetts punchcard, but it would take one smart cookie.

 

I've noticed my returns have improved with longer holding periods and long periods of inactivity. I also believe I'm doing a better job of analyzing and picking my pitches.

 

Would be interested in hearing what some board members long-term turnover rate is. 

[Guest deepValue]

I have maybe two or three actionable ideas per year on average. The number of trades I make depends on liquidity, price drops, number of opportunities, etc. But let's just say my 8949/1040d is the easiest part of doing my taxes. But then again, I don't buy companies that are worth 90% less than what I paid  :)

[DTEJD1997]

Hey Everybody:

 

Just to give you a bit more history & color on my trades.

 

I started investing when I was 18 & 1st year in college.

 

HOWEVER, I only started seriously investing 7 years ago.

 

My portfolio is very modest with maybe a dozen or so different positions.  I typically only in invest LONG in stocks, but every once in a blue moon will sell options (covered calls usually) or will buy warrants.

 

Most of my positions are nano caps or small caps, but not exclusively so.

 

At this point, I have more ideas than capital.  I suspect that will be the case for a long time, as hunting out bargains is one of my favorite hobbies.

 

My single largest position is about 30% of my portfolio, as it has grown into that through a 3X rise in price.  I have not sold any as I expect it to appreciate significantly more in the next year or so.

 

A little more than 1/2 of my positions pay dividends.  Dividends are not my primary concern, but they play a factor in my evaluation of a position.

 

I have not held any position that has gone to ZERO, but I have had some losses of greater than 30%, but not many.

 

 

I will expand a position if a stock declines in price but still has solid fundamentals, averaging down.

 

My greatest return has been about a 7X return (when taking into account dividends).

 

My biggest mistakes have been doing the research and then not pulling the trigger AND selling out too early.  I've missed a few 100X baggers this way...National Beverage (FIZZ) I'm looking at you!

 

Good luck to everyone.  I hope you catch those 100X returns!

[watsa_is_a_randian_hero]

I have 86 trades YTD...so may be more active that most. 

 

When I had a smaller portfolio, I traded less.  However, with a larger portfolio, I can fade into/out of a position through multiple trades without getting the commission becoming too large of a % of the trade.  Furthermore, I am certain Buffett is not entering into trades like a $10 billion purchase of IBM shares as a single limit order.  There are some benefits to fading in and out of positions based on the market prices offered. 

 

In addition, as I'm saving more, and as my portfolio continues to expand, I continue to invest in existing ideas. 

 

Finally of those 86 trades, there are only 7 positions that were newly opened or closed.  Of those 7, the average size was 0.55%.  This would still imply a very low turnover rate.  Despite the high number of trades, roughly 50% of my portfolio is in my top 3 ideas, and my largest positions have very low turnover. 

 

More relevant questions in my opinion are, of the positions currently held, how long ago is your weighted average holding period? Over the last 5-10 years, has your weighted average holding period been?  And what are annual commissions as a % of portfolio size. 

[racemize]

Hey Everybody:

 

Just to give you a bit more history & color on my trades.

 

I started investing when I was 18 & 1st year in college.

 

HOWEVER, I only started seriously investing 7 years ago.

 

My portfolio is very modest with maybe a dozen or so different positions.  I typically only in invest LONG in stocks, but every once in a blue moon will sell options (covered calls usually) or will buy warrants.

 

Most of my positions are nano caps or small caps, but not exclusively so.

 

At this point, I have more ideas than capital.  I suspect that will be the case for a long time, as hunting out bargains is one of my favorite hobbies.

 

My single largest position is about 30% of my portfolio, as it has grown into that through a 3X rise in price.  I have not sold any as I expect it to appreciate significantly more in the next year or so.

 

A little more than 1/2 of my positions pay dividends.  Dividends are not my primary concern, but they play a factor in my evaluation of a position.

 

I have not held any position that has gone to ZERO, but I have had some losses of greater than 30%, but not many.

 

 

I will expand a position if a stock declines in price but still has solid fundamentals, averaging down.

 

My greatest return has been about a 7X return (when taking into account dividends).

 

My biggest mistakes have been doing the research and then not pulling the trigger AND selling out too early.  I've missed a few 100X baggers this way...National Beverage (FIZZ) I'm looking at you!

 

Good luck to everyone.  I hope you catch those 100X returns!

 

Thanks for posting this.  Would you mind telling us how your returns have been over time?  Did you pretty much stick to value investing tenets throughout?

[DTEJD1997]

racemize:

 

I almost always stick to deep value ideas, probably well over 90% of the time.

 

It is hard to judge my returns over time, as I was largely absent from trading/investing after the calamity of pursuing an advanced degree....

 

I also have the problem that I've been taking out & putting money into my cash account as I've needed it.  HOWEVER, the returns in it have been "good".

 

What is easy to figure out is the returns in my IRA account.  Money goes in and never goes out, making it easy to calculate returns.  The compound rate of return in that for the last 6 years has been a shade under 22% per year.

 

I suspect my cash account returns are close, but not quite as good, probably in the very high teens.

 

Some positions I've held for over 5 years.  My shortest time trade was going into IBBI (Indianna Business Bancorp), I think I was long for a period of 8 days.  The stock ran up about 20% in a week, so I figured, why not? SELL, of course, it kept going higher...

 

I like investing in small community banks!

 

I would say that my average holding period is probably about 3-4 years.  I think holding periods should be in YEARS, but each position is unique.

 

I think this is a great board.  I personally know several people who are members and encouraged me to join.  I am glad that I did, but regret that it took me so long to do so.

 

 

[Ross812]

I have a core portfolio that I don't touch unless its adding to the positions. These 4-7 stocks roll over maybe every 2-4 years unless they get too expensive for me to hold. I have up to 10 small 1-2% positions that I only average down to buy more. I start with a 1% position and double it if the companies stock goes down 10 or 20% (depending on how volatile the stock is). I will double it again after another 10-20% down for a 4% position. If the company's stock keeps going down I will double my position one or two more times for a 8-16% position if I have the cash.

 

This year I've made 17 stock trades, mostly selling. I'm at 30% cash right now. I play with short term play money option spreads if I really feel the need to trade.