There are 3 parts to a stock trader’s portfolio that we will take a look at today. These three types of trades will help you to have a well-balanced portfolio.
- Can be for day trading (you can hold it for 5 minutes or all day)
- Can be for swing trading (you can hold it for multiple days)
- Directional in nature (going up or down)
- Easiest to understand; hardest to get right
In speculative trades, I personally recommend swing trading – there is only so much you can accomplish in a six-hour day. These speculative trades are the hardest because if the stock doesn't go in the direction you hope, you’re in bad shape.
Monthly Income Trades
- Money you make every month from option deterioration (theta)
- Trades such as iron condor, butterfly, calendar trades
- Not always profitable every single month, but overall profitable for the year
- Tip: stick with the same vehicle (stock, ETFs)
- Can be used for retirement accounts
Long-Term Investment / IRA
- Usually for retirement accounts or long-term savings accounts
- Can be stock holdings
- Can be option, such as diagonal (better yield)
How do I allocate my portfolio
- Market will have different environments at different times of year
- You may want to adjust occasionally to do more long-term positions
- Sometimes you may want to adjust to do more speculative positions
I recommend that you watch the environment and develop a few different strategies to help you profit from the market at its various conditions. You may find that you take periods of time where you don’t trade at all.
You need a plan that works for you. You are the person that cares the most about your money – not a broker or hedge fund manager. You are the person that cares most about what happens to your money.