As I stated in the posting about my power savings (which has of course a financial aspect), I was suprised about the amount of money for my retirement. Not positively surprised.
I had to rethink my actual income situation and ended with some kind of plan.
The core tought: After all expenses, I have to save at least 2000 Euro per month. No cent less! Not in average!
This amount is more as is left from my regular job, so I have to add some extra work and I have to invest.
Now,
- I started investing on 2023-02-15 – it is running lucky for me, 5-figures gain after two weeks
- For my side-job as freelancer I could aquire a 5-figures order (yay…)
The investment thing is exciting. What is the idea?
Unfortunately, not for everyone…so I explain and please take this not as a blueprint, more as a warning.
I’m active at stock market for nearly 40 years, already in school I was playing with stocks. I made very good money late 1990-ies to begin 2000-ies with the rise of the internet companies. Then it got bad, with tumbling markets (the new market, tech market and… of course… 9/11).
I tried to compensate this with switching to turbo options. Turbo options are derivates, which are based on a share or an index, but cutting some part of the value.
Example: If the (leading german stock index) DAX stands at 10.000 points and the turbo option is based on 9.900, so the turbo costs about 1 Euro (10.000 – 9.900 = 100 cents + about 1-5 Cents fee for the issuing bank). If the DAX add one point, the turbo adds 1 Cent. If the DAX adds 100 points, the turbo adds 100 Cents = 1 Euro. With other words: The DAX add 1% the turbo add 100% (therefore: „TURBO“). This 1:100 relation is called lever and because of the 100, they call „the lever is 100“ related to the underlying paper.
This sounds great up to the point, when DAX falls under 9.900 points – to 9899.9, for a second, in the OTC-trading times or over the night. Then all money from the turbo is lost forever.
With other words: A turbo has great opportunities, but the higher the opportunites, the higher the risk.
Turbo done wrong
Let me say… as I tried this, I took faaar too much risk. I had turbos with levers of over 100, sometims lever 200. So in the example above, It would based on 9.950 for a 10.000 DAX. And a 50 points loss in DAX can happen really fast.
There was a week, I lost 38.000 Euros, every Euro from my (safer) gains before. I decided to stop this immediately. Of course, I didn’t tink on my retirement…
Additionally there are two types of turbos: „long turbos“, which gain on rising stocks, „short turbos“, wich gain on loss.The example above is a „long turbo 9.900“.
A „short turbo 10.1000“ in example above would be this: 10.000 points index with a 10.100 short turbo for about 1 Euro. The DAX lose 1 point, the short turbo wins 1 Cent. If the DAX loses 100 points and reaches 9.900 points, the short turbo has the value of 200 Cent, in the explanation before, it is a „100 lever short turbo“.
For your warning: Do this only with money which you don’t need. If you ask yourself, whether you need it or not… I assure you, you need it, don’t do it!
Learnings
I tried it sometimes later again, but some gain, some loss, a little money left, not so much. Not fun.
But from the years, I learnd, why I failed:
- Mostly, because I sold to early (on rising stocks) and to late (on falling stocks) in combination with the risk. That sounds simple, but in mostly all cases I was right at the end with the direction of the market. That doesn’t matter, if the turbo is rotten in the meantime, so I couldn’t reach the winning zone.
- The second reason was also some kind of impatience: After one trade, do another immediately. Don’t wait, how the market evolves.
- No plan, what doing on losses
Action!
So, I feel more experienced now. The most important thing is to decrease the risk. If the risk is low, you have time to make decisions and to endure bad (temporary) situations. Lower risks means to invest more money for the same gain.
I have some money now, which can help decreasing risk. Let me transfer some of it to my broker.
I made some fairly assumptions about the next week (I check this assumption every day and adapt, if necessary). My assumption was, the DAX will not climb over 16.050 points (it stands at about 15.500 at this moment). That means, I’m safe with my money, if the DAX is not rising over 3,5% and the situation at the moment (war in Ukraine, high inflation, supply chain issues) is not so, that the DAX will rise 3,5% in one day – hopefully. More probably it will drop over time.
So, if I want to bet on dropping markets, I need a turbo short -> „short turbo 16.050“. The lever is about 28. This is still high, but far safer than any trade with turbos I made before.
BUT IT IS STILL HIGH RISK TRADING.
Result & Summary
Adding my experience (which you got in four decades of occupation with the stock market) in the „what happens in the next hours“ topic and the composure with the fairly low risk…
… resulting in eight consecutive trades with the turbo since 2023-02-15, every trade with gain, and I have won over 18.000 Euro (taxes already paid). I missed the opportunity to make another 25.000 Euro, because I sold too early.
Please take this lession too: At the moment I sold, I had (already big) gain and that was SAFE AND REAL IN THIS MOMENT. You cannot know what happens in the next hour after gaining so much, so maybe you could loss all (hopefully only a part of it), if you stay invested. This trouble is real!
Don’t make the fault to think „because it happend in the past several times, it is getting higer and higher again after this short downphase“. React fast, if the positive trend seems to reverse and take your win.
From my point of view, I don’t take this as pressure to be more successful. I have to stay rationally. This is so much money in just two weeks, most of the people don’t win over one year with this amount of capital I invested. It is very possible that I will minimizing my risk more with the outlook to gain less.
The bank consultants say, the older one gets, the more conservative should be the investment. Just do make the retirement money safe. But I don’t feel old enough to get on government bonds… Maybe when the retirement really comes, I think on boring investments for 5% ROI.