How to invest my SEP-IRA money

[disneysteve]

I first opened my SEP-IRA two years ago and was only able to contribute a little over $700 so there wasn't a whole lot I could do with it. I did a little stock trading and made a few bucks and just treated it as fun money. Last year I added another $800 or so and made a couple more trades and a little more profit. I just put in my 2011 contribution of $1,256 which will bring me up to about $3,000 in the account. I still may do some trading though right at the moment I don't have anything in mind so I'm thinking about just buying a mutual fund or ETF. This still represents less than 1% of our total investment portfolio so anything I do with it won't throw off our asset allocation by more than a fraction of a point. A good or bad day for the market has more of an effect.

So if you had $3,000 to play with right now in a tax-deferred account at a discount broker ($7 trades), what would you do? Individual stocks? MF or ETF?

[kv968]

Since it's less than 1% of your total investment I would definitely invest in individual stocks. More risk/possible more reward. Do a little homework, see what you like and let it ride. If there's nothing out there at the moment that you particularly like, find some stocks that you would like to own at some price and wait and see if they come down. Investing doesn't mean you have to be in the market 100% of the time. Patience, especially when investing in individual stocks, is a virtue.

With $3000, you could even do 3 different stocks since the commissions would only be 1.4% of each investment. A substantial amount, but easily overcome with the right stock. Good luck.

[KTP]

DS, roll the $3000 over to Optionshouse. You will get 100 free stock or option trades and after that trades are only $3.95. I won't even ask for the $150 for referring you

It will take you about 10 minutes to do the paperwork to transfer the funds, and the 100 free trades could be worth north of $700 to you.

[snafu]

I too would use it as a 'trading' account holding individual stocks. With your background and interests would you enjoy researching companies with new, soon to be approved drugs or gaming companies which have potential to be ten baggers? If MF is your preference, try a 4 star Science Technology fund with great potential. Just now I'm following an Index in Brazil. I think both S. America and S Africa have major potential.

[bjl584]

If I had $3000 that I didn't care if I lost it all, then I would use it to trade individual stocks. I'd use the account as a sort of training grounds to sharpen my stock trading skills.

[disneysteve]

Looks like we all agree to use it for trading, which is what I've been doing. So any hot tips?

[bjl584]

Looks like we all agree to use it for trading, which is what I've been doing. So any hot tips?

Currently eyeing SDRL and FTR

[kv968]

Currently eyeing SDRL and FTR

I've been eyeing FTR since it was ~$8 and I'm glad I just kept eyeing

[KTP]

Seadrill is mostly owned by the same guy who owns Frontline...and Frontline went from $28 to $2.50. Now I admit I did look at it when it was $2.50 and passed on it, and now it is trading at $7.50...

My big score is hopefully going to be ALU if they can turn a healthy cash flow this year. It is trading at around $2.30 and could very easily jump to $6 overnight.

[kv968]

My big score is hopefully going to be ALU if they can turn a healthy cash flow this year. It is trading at around $2.30 and could very easily jump to $6 overnight.

Thanks to you and my parents, I have ALU on my watchlist too. I'm trying to see if I can get in around the $2.15 level.

[KTP]

Thanks to you and my parents, I have ALU on my watchlist too. I'm trying to see if I can get in around the $2.15 level.

I sold a bunch of Jan 2013 $3 puts for $0.90 to $1.05 (like 80 of them) so that would get me into the shares at less than $2, or if the stock goes to $6 instead and I am never assigned, then I guess I will just have to be happy pocketing the $8000 premium I got for the puts.

I have $16,000 at risk (ALU goes bankrupt and I am assigned the 8000 shares at $3 each = $24,000 - $8000 for the premium I got selling them).

I don't see an immediate risk of bankruptcy, so it is probably more realistic to say I have around $8,000 at serious risk for an $8,000 return.

Be carefull if you buy the actual ALU shares as depository receipts. They charge a very hefty fee of $0.02 per share every 6 to 12 months to manage the ADRs, which can add up if you have thousands of shares. The beauty of the naked put selling is you don't have to pay this fee.

[kv968]

I sold a bunch of Jan 2013 $3 puts for $0.90 to $1.05 (like 80 of them) so that would get me into the shares at less than $2, or if the stock goes to $6 instead and I am never assigned, then I guess I will just have to be happy pocketing the $8000 premium I got for the puts.

I have $16,000 at risk (ALU goes bankrupt and I am assigned the 8000 shares at $3 each = $24,000 - $8000 for the premium I got selling them).

I don't see an immediate risk of bankruptcy, so it is probably more realistic to say I have around $8,000 at serious risk for an $8,000 return.

Be carefull if you buy the actual ALU shares as depository receipts. They charge a very hefty fee of $0.02 per share every 6 to 12 months to manage the ADRs, which can add up if you have thousands of shares. The beauty of the naked put selling is you don't have to pay this fee.

I was thinking about buying some puts (not quite that many though). I have to get an Optionshouse account. Doing something like that would kill me at Scottrade.

How easy is it change your rate on options with them?

And thanks for the heads-ups about the ADR. I didn't realize that's what they were. Is that fee just at Optionshouse or have you seen that other brokers also?

Steve, sorry for highjacking your thread

[disneysteve]

Steve, sorry for highjacking your thread

That's okay. We needed a new trading thread. The last one died out.

[LivingAlmostLarge]

DIG for oil ETF but twice the index. Ride it both up and down. Made a lot over the years.

[KTP]

I was thinking about buying some puts (not quite that many though). I have to get an Optionshouse account. Doing something like that would kill me at Scottrade.

How easy is it change your rate on options with them?

And thanks for the heads-ups about the ADR. I didn't realize that's what they were. Is that fee just at Optionshouse or have you seen that other brokers also?

Steve, sorry for highjacking your thread

I think you mean "selling some puts" instead of buying them. When you sell a put to someone else, you collect the premium for the sale and agree to buy the stock from them at the strike price of the put. It is called "selling cash secured puts". I think of it as sort of a way to buy a stock at the price you like instead of the current higher price.

I highly highly recommend Optionshouse. After your 100 free stock or option trades run out it is still cheap (you will have such fun with these free trades though, because you can buy a 200 shares of a stock for $5 and not feel bad selling it for $5.20 and booking a $40 profit. If you had to pay $7 in commission each way you might start thinking about the fact that the commission is like 35% of your profits

When you change from the $5 for 5 option contract plan flat rate to the $8.50 plus 0.15 per contract plan (which becomes cheaper past 10 contracts) it takes just one overnight period...ie, you can trade one plan on monday, change plans that evening, and trade the new plan on tuesday.

The ALU depository receipt fee is charged by the bank that handles the french company's shares on the american exchange and is in my opinion ridiculously high for the current share price. If ALU were $20 per share, then 2 cents might be reasonable. All brokers are required to collect this fee, but it was just accessed in Feb so you might skip it if you only hold shares for a few months.