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At the end of Friday, July 15, the US market, as represented by the S&P 500, was up 5.22% for the month. The Toronto Stock exchange (TSX) was down 4.11%.

Our fearless, intrepid investor’s core portfolio was up +8.44% for the month!

Her core portfolio performance arose from the fact that when the S&P 500 dropped by 20% from its January 3 high, she bought more SPY, which tracks the S&P 500 precisely.

Her “fun” portfolio is a different story. Like most “fun” portfolios, it has not been much fun lately. However, she is smart enough to keep it under 10% of her stock market investments overall.

On Friday, July 8, she was assigned and to stay in the game, on Monday, July 11, she bought 1000 shares of Novavax (NVAX) at $71.2567 per share for a total cost of $71,256.70. On Friday, July 15, NVAX closed at $54.43, giving her shares a market value of $54,430.00. That is a loss of $16,826.70 ($71,256.70-$54,430.00). Her premium income was $1.0696 per share for a total of $1,070.00. That took some of the sting out of the overall loss in this venture but certainly, not enough.

And what are her plans today when the market opens at 9:30 AM?

Investors could easily spend the whole day listening to financial talking heads (not to be confused with the American rock band using that name). Financial talking heads rarely offer actionable suggestions.

Investors’ portfolio results would be no further ahead.

Having said that, I have joined Sasha Starr’s financial talking heads, at Sasha’s invitation. I am doing it primarily to draw attention to Monday Morning Millionaire and to present our investment philosophy.

If you care to watch the Wednesday, October 12 show, follow https://youtu.be/ay3B3XCcqkw.

On Tuesday, July 5, we promised to report on Monday, July 11, how our fearless, intrepid investor did in her “fun” portfolio for the week ending on Friday, July 8, and her plans for the week of July 11 to July 15.

Instead, we published a post about investing in derivatives safely and effectively.

Here is how she made out so far this month.

At the end of Friday, July 8, the market was down 7.6% for the month.

Her portfolios are up for the month, overall!

That resulted of her buying 200 shares of Novavax (NVAX) in her core portfolio as NVAX became a greater bargain last week. She already held 2,300 shares in her “fun” portfolio. Her NVAX shares rose last week by more than the market dropped.

That is an unsustainable result entirely arising from luck and not skill.

And what did she do yesterday?

We should only sell (only sell and never buy) derivatives (puts and calls) in our “fun” portfolio. Doing so invites a level of risk inappropriate for our core portfolio.

Social Sciences Research Network (SSRN)  is an outstanding source of academic, evidence-based information. The SSRN economic papers are difficult for the layperson to understand, but the abstracts are manageable.

Some examples follow.

Covered Calls Uncovered

As promised in our June 30 post, we describe the Monday Morning Millionaire approach to asset allocation. You will not find a more straightforward way, or any evidence that the more complicated versions are more effective. Investors would benefit from having an appropriate asset allocation underlying their core portfolios.

We first wrote about asset allocation shortly after we launched Monday Morning Millionaire.

WHY CAN’T DENTISTS AFFORD TO RETIRE?

I have orchestrated thousands of private consultations with dentists throughout my career.

Many hang a head in shame and regret about their bad financial decisions.

Most say they are not ready to sell – they need to keep working.

Need: it is a 4-letter word that is used to express a decision based on necessity – not desire. Sad….

Why do they need to keep working?

The answer is always the same: Bad financial advisors.

It is NOT bad financial advice…. It is the bad financial Advisors – the people!

The dental practice always does fine. It provides a great income for most dentists. Practice values are at an all-time high!

A Dental Practice is an Exceptional Investment – the subtitle of my book. That is not the source of financial disaster.

So, what happened? Why are so many dentists (and most other professionals) in financial trouble?

Its bad investments promoted by bad investment advisors.

Bad investments are the #1 drain on their lifetime savings.

And now I will tell it exactly as I see it: There are a lot of questionable and suspect characters that are trying to tell professionals where they should invest their money. Most of them make very handsome fees for dispensing this advice and many of these investments seem to diminish retirement savings as opposed to increasing them.

Please watch out for the hustlers and thieves who dispense shady investment advice.

What should you do? My advice is exacting and brutally simple. Start with these two tasks:

1. Put your money into a self-directed account that does not require any third-party investment advisor influence or involvement.
2. Buy an exchange traded fund that tracks the S&P 500.

There are several other habits that make for highly effective successful investors, and they can all be found at https://lnkd.in/ga2FZVkJ.

Disclosure: I am a co-Founder of Monday Morning Millionaire. We charge $12 per year for a subscription. We make ZERO (nil) fees from any wisdom we share. We do NOT dispense financial advice – never! Your investment is $12 per year. Is this bad financial advice?

First, a thank you to all who gifted a membership or a one-on-one zoom meeting to friends and relatives. We think that they make ideal gifts. Consider it.

And now, our sincere gratitude to all members who took the time to respond to our Friday, July 1 survey about the impact of a recession. Time is an irreplaceable resource. We appreciate your involvement.

Economists define a recession as a period of economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. We are, or soon will be in a recession.

You can see our survey results below.

You can you read some worthwhile comments below.

What are her plans  for the $20,700.00 today when the market opens at 9:30 AM? (Monday, July 4, is a market holiday.)

What is the worst that can happen?

What is the best that can happen?

We should only sell (only sell and never buy) derivatives (puts and calls) in our “fun” portfolio. Doing so invites a level of risk inappropriate for our core portfolio.

Social Sciences Research Network (SSRN)  is an outstanding source of academic, evidence-based information. The SSRN economic papers are difficult for the layperson to understand, but the abstracts are manageable.

Some examples follow.

Covered Calls Uncovered

Greetings everyone,

First, a sincere thanks to all of you who gifted memberships and one-hour sessions to friends and relatives. A more useful gift would be difficult to find.

Next, we think all of you who took the time to respond to our surveys.

In May, 2021, we asked our members and subscribers to what extent they were interested in derivatives (calls and puts).

We conducted a similar survey recently. You can see the results below. They are almost identical to the May, 2021 survey.

Below, you can see our response to relevant comments. ___________________________________

Comment

Writing calls and puts should be done in a “fun” portfolio only. 

Our response

We agree. Occasionally, with luck, we will stumble across a safe, worthwhile derivatives experience in our “fun” portfolio. We can then do some of that in our core portfolio.

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Comment

More about on step by step of when and how to do it. More homework based on do-it-yourself approach.

Our response

We will have something useful and to the point on most Mondays.

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Comment

I have written calls and puts but have  difficulty understanding how productive they are compared to if they were not used.

Our response

As we frequently state, luck hardly matters with the habits of the Monday Morning Program. Except on rare occasions, writing derivatives does require luck.

Investors with a long-term mindset can do very well without writing derivatives.

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Comment

Still not sure how to make money using covered calls.  Would like to learn how one does it.

Our response

We will publish condensed versions of Social Sciences Research Network articles dealing with this issue.

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Comment

Who made you think of this survey?

Our response

Former ODA president (1970 – 1971) Ivan Hrabowsky made me think of it. On 2022-08-02 Ivan will be 91 years old.  He likes stimulating discussion.

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Comment

I am interested in the process, but as I have said, ‘I am a poor gambler’.

Our response

Our posts on this subject will require minimal gambling.

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Comment

These derivatives add to returns if used prudently.

Our response

We fully agree with your comments. Acting prudently applies to all investing. Investing of any kind always involves risks, but if the benefits exceed the risks, we will come out ahead most of the time, but not all the time.

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Comment

Sure, you always make money when you sell calls. But if the security is called away and you are staying with the same security (e.g. SPY) you will have to buy the shares back at a higher price before selling calls again. If the premium received does not cover the difference between the old share and new share cost there is no profit made in this transaction. This can happen frequently. You are trying to predict the market in a short time interval (weekly) which is akin to gambling.

Our response

Your comments are spot on!

We will review evidence–based methods to lower (but not eliminate) all risk.

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