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Retirement Capital Strategies
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  • January 26, 2021

Shelter-in-Place Stock Market Update 1.26.2021 – Where we place our stop losses

Disclaimer - Read More

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.

Transcript

Hello everybody, welcome to Tuesday, the S&P 500 was down .15%. Today was really kind of a flat day, not a lot going on good chance for me to talk about some of the other things that are happening. First of all I want to talk to about the rebalancing that we did inside of the IRA and Roth IRA types of accounts, you’re gonna see quite a few transactions coming through and when we do rebalance, we rebalance every position back to the model. And I took that chance to make some changes to the model, some things I’ve been wanting to do for a while now. And the nice thing is, there’s no taxation in though so we don’t have to worry about, you know, accounting for that. And then also, you know, using TD Ameritrade, we don’t have any, you know, commissions for those either.

So that’s, that’s a great thing. We’ve had to do a lot more transactions. So far this year, just because of what’s been happening, it’s been working spectacularly, you know, the rate of return you’ve been getting, as are because of these transactions, on the other types of accounts that are taxable, like trust accounts, and individual accounts, TOD accounts, etc, we did not make those changes, enmass like that, it just creates too many transactions to account for, and it creates too much taxation, we actually go through those accounts by hand on a monthly basis and we basically move over those pieces that we think are the most important to move over where we think we can make back any kind of capital gain that we might have to pay. So that’s sort of a different situation. So anyway, just a heads up for for, you know, you’ll see a lot of transactions coming through, but it’s all okay. Again, you know, we don’t make anything on transactions. We’re just trying to make the accounts grow, you know, like they have been, so I’ve been getting questions about the Stop Losses, you know, “What are they?” “How do they work?” “Where do we set them and such to?”

So let me let me discuss that, because I think, you know, it’s a really interesting area, to me, altogether. This is a chart here, this is CNRG, which is a clean energy, you know, Kensho clean energy piece, you know, we started buying this back here, it’s had a fantastic run, made lots of money. And you can see this red line here is a Stop Loss. So what a Stop Loss is, theoretically, is that when this price falls down to that red line, it’ll sell our 58,000 shares that we have there. And so it kind of protects some of these, you know, gains now doesn’t always work, price can jump through there, and we can maybe get a different price or what have you. But it’s a very valid methodology to try to protect risk. And I don’t normally use them, because I don’t want to have a Stop Loss in here, for example, get wiped out of this, just before it goes running up, for example. But this is an extreme run here. This is really, really moving. And so I put a Stop Loss right here. So the reason it’s here has a lot to do with this volume profile. So every one of these little bars shows how many shares traded at each share price. And so you can see there’s a lot of shares traded right here, which makes sense, you can kind of see that the price spent some time there. And so that’s why that’s there. So I put this Stop Loss just below this big grouping of support. So if the stock does it fall, maybe it balances and keeps on going. If it breaks through here, the next support is here. And you can see that’s because of this little consolidation here. And the next report is all the way down here. This red line just represents the highest support level of the entire timeframe. In this case, it’s a year. But this is about 34%, from where we are now.

So I’m not that interested in writing this all the way back down, especially since this Stop Loss in this particular case is just for the IRA accounts. And I don’t have to worry about any capital gains that we might have made so far. I can, you know, get out for a while if I want to get back in I can, you know, maybe I want to go someplace else, or what have you. But there are lots of different places I might place a Stop Loss. If this was in a very conservative account, I might move it up here, right at this level, because somebody you know, being more conservative, they’re trying to protect the downside, they still want to see if it’s going to run. But we’re trying to protect that downside a little bit closer. Or if I actually kind of wanted to get rid of this position for whatever reason, maybe I had something else that I was more interested in, then I would tighten up that Stop Loss to this point. On the other hand, let’s say that I really had a huge capital gain in this, I might move that Stop Loss all the way down to here just you know, to let it run if it does fall, okay, maybe it’ll stop with this, you know, support. But if it falls to that support, maybe I just want to protect my gain at that point and pay my taxes. So again, taxation, volatility, all those things, play a factor in where you’re going to place your Stop Loss.

But it’s really, really critical to take a look at a volume profile to be able to see where those support levels are. So that you can actually accurately place a Stop Loss because technically, if that’s the position that you still hold, you probably like it, you probably don’t want to get knocked out of it. And so you’re really hoping you know, to pick a spot. A lot of times people just pick a random percentage: 10%, 15%, 20%. I like looking at the charts and placing these, you know, more precisely as far as that goes. So that’s what a Stop Loss is, I think it’s something that everybody should be using in this market environment right now. You know, when you’re in these sideways, choppy markets, or what have you, you know, that’s a different story, as far as that goes, but when you’ve had this type of fantastic run up, the P/E ratios here are ridiculous, you know, those types of things could definitely go higher, you know, the, the vaccines coming pent up demand 0% interest rates, this thing could go significantly higher. And if it does, I’ll continue to move this Stop Loss up as far as that goes. But, you know, just in case, we want to protect some of these pieces. And again, they’re not perfect, they don’t always work.

But I do think it’s a valid strategy for controlling some of the risk and allow you to kind of just stay in there, if it keeps going. Great. That’s perfect. So we have Stop Losses, and all of our major pieces, all of our you know, volatile pieces, we have Stop Losses, those counts that are more conservative, we have those Stop Losses a little bit closer, those accounts that have taxation, we have those Stop Losses a little bit lower, we want to let them you know, move around more, we don’t want to generate a bunch of capital gains, unless we absolutely have to, we don’t want it to turn into no gain. So that’s important too. But, you know, there’s a balance there. So that’s part of the calculation. It’s, it’s fairly complex as to where you put these and what have you. But you know, it’s, it’s, it’s a really fun, you know, environment to be working in for those types of Stop Losses right now. So, anyway, that’s what’s happening right now. Hopefully that helps answer some of the questions that have been coming and look forward to seeing what’s going to happen tomorrow. Thank you very much.

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Disclaimer - Read More

Tom Vaughan is a Certified Portfolio Manager and CEO of Retirement Capital Strategies. Retirement Capital Strategies is a registered investment advisor located in San Jose, California.

The opinions voiced in these presentations are for general information only and are not intended to provide specific advice or recommendations for any individual(s). The information provided herein is obtained from sources believed to be reliable, but no reservation or warranty is made as to its accuracy or completeness. Statements and opinions are subject to change without notice. Asset allocation and portfolio diversification cannot assure or guarantee better performance and cannot eliminate the risk of investment losses. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. Accordingly, you should not rely solely on the information contained in these materials in making any investment decision as the material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned in this presentation. Before acting on information discussed in this presentation, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment advisor. Prospectuses, investment objectives, risks, charges and expenses of any investment product should be reviewed carefully before investing. This platform is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Retirement Capital Strategies and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Tom Vaughan or Retirement Capital Strategies unless a client service agreement is in place. “Likes” are not intended to be endorsements of our firm, our advisors or our services. Please be aware that while we monitor comments and “likes” left on this page, we do not endorse or necessarily share the same opinions expressed by site users. While we appreciate your comments and feedback please be aware that any form of testimony from current or past clients about their experience with our firm is strictly forbidden under current securities laws. Please honor our request to limit your posts to industry-related educational information, comments and questions. Third-party rankings and recognitions are no guarantee of future investment success and do not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the advisor by any client nor are they representative of any one client’s evaluation. Investment positions mentioned in these videos may be held in some of our existing portfolios. Tom Vaughan and Retirement Capital Strategies are unaffiliated and separate from those companies whose investment positions are mentioned and is not liable for their products or services.

By participating in any of these live streams, you agree that any questions submitted by you might be used by us in the future on this YouTube channel. We will not share your personal information.

If you have questions, please write to us at: asktom@talkmoneywithtom.com.

  • MoneyGuidePro®
  • Advent Software/Black Diamond Reporting
  • Riskalyze, Inc.
  • thinkpipes®
  • Right Capital
  • YCharts, Inc.

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