Saturday, January 31, 2009

Change of Direction

This move is probably overdue by several weeks, if not months. Now is as good a time as any, so...

I am in the process of converting my brokerage account into a pure trading vehicle. All investment activities will occur in either my employer 401(k) OR in my self-directed Roth IRA. I plan to migrate all of my existing investment allocations to InvivoAnalytics' Satellite Portfolio into my Roth IRA over the course of the year. It will be a slow process of rebuilding in the Roth, but it's for the best.

I have liquidated all holdings in my brokerage account that are long term investment oriented holdings. I won't be switching to another broker (for now).

I am doing this because mixing the 2 objectives in a single account had become...messy. I have found it difficult to maintain focus, which has distracted me and slowed my decision making. Slow decision making has led to missed opportunities.

Converting the brokerage account for purely trading will also allow me to take more concentrated positions than I can currently. I believe this will allow me to grow my brokerage account faster. I am to the point where the balance in my brokerage account, while not huge, is large enough to actually do something "useful". In a sense, my account finally has some weight.

Finally, the long horizon investment holdings will sit in a tax advantaged retirement account. I've had this account open for a while, but it has been dormant. Increasing the activity in this account will lead to tax diversification, which is always a plus. The investment holdings will also be allowed to grow unencumbered by my need/desire to raise trading funds, not that I was sacrificing them anyway. However, now that the split is physical and not just logical, I no longer suffer from temptation to touch those long term holdings.

For the next few trading sessions, I will be essentially "paper trading" - researching and studying trades ahead of trading sessions, but not actually executing them. Instead, I will watch how my proposed trades perform and how I can adapt my trading system(s) before I start risking capital. Even though I have had more success than failures on the few trades I've made, and I do want to start trading to earn money for various purposes, I've decided to spend a bit of time on my education by doing this. It sucks, but losing real money would suck more.

Until next time...

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