Sky, I have about 80% in a mutual fund that I dont touch and about 20% in a Simple IRA. I've been fooling around with some stocks in the simple, but mostly ETFs, some gold, bonds. I do have let's call it 25% of the simple in individual stock picks. I did take profits about a month ago and was sitting on about 25-30% cash for most of March. Mostly because I feel like its going to pull back. I did move to get in to VXX and VIXY last week with some of the cash. I just noticed you mentioned those in this thread. Bascially, am I doing it wrong? I'm not an experienced investor, in case you haven't already realized. I'm 30 and have a mortgage. No kids. No other debt. I'm obviously willing to be exposed to some risk but am is it too much/too little?
ETA: I pretty much just want to know if I'm doing anything overly stupid.
Great question. And I'm humbled that some of you have asked me for my opinion either via PM or out in the open. Thank you for that.
Anyhow, when you say that you were 25-30% cash for most of March, do you mean 25-30% cash for the portion that's allocated to the Simple IRA which is only 20% of your holdings? So in other words, 25-30% of a total 20% position/give or take, 6% of your total portfolio?
If VIXY or VXX is only a 6% position out of all of your holdings, I think that's fine. If it's 25-30% out of all of your holdings, that's way too much. However, I cannot lie. I have (as of this past Wednesday morning) roughly 7% in VIXY, 7% in UVXY and another 10-12% in TZA along with an enormous amount of puts expiring in September that I bought for dirt cheap over the past six-eight weeks. Can you tell I'm Bearish?
Also, one *major* difference between VXX and VIXY is that VXX is an ETN where as VIXY is an ETF. For many, many reasons I prefer ETF's to ETN's. And with structured products like this, (and other investments) something called Contango is a big concern and cannot be combated without a lot of nerve and patience.
Saying all of that, and knowing that there are a lot of issues/problems/inefficiencies/tracking error(s) with something like VIXY and UVXY, I still think it's a great diversifier for right now. I think watching a position each and every day can give you an ulcer, but something like UVXY and VIXY have to be monitored closely. If (and in my opinion, when) they both have a large increase (I mean really large, like +50% or more) I'm going to start to put sell stops on a couple of the blocks I have. I've seen things like this zoom all the way to the top and stay there for a day, and then drop 30% the following week. They're very volatile, so it won't be a pretty ride, but my conviction is strong that volatility will increase at some point soon, and there's no direct and easy way to invest directly with the CBOE-VIX. Instead, VIXY and UVXY will have to do for now, and I think they'll do well. So no, you're not doing anything wrong in my very humble opinion.
Also, a Simple IRA with access to ETF's and individual stocks is awesome. Who does the employer have it through, and what's the mutual fund with 80% of your cake in it?