Living off of large-cap stocks: Initial Thoughts

 Living off of large-cap stocks: Initial Thoughts

In the 1990s, I lost everything, just like a lot other stock market traders and investors. When you glanced at the charts, high-tech stocks appeared to be can't-miss chances since they consistently seemed to give such enormous profits. However, the value of my stock holdings steadily declined as the decade went on. till it was almost completely gone.

I was searching for equities at the time to keep for a few months before selling. stocks with a high probability of rising quickly. I studied technical and fundamental analysis, designed and tested back-tested stock trading techniques, and read every book available. I was so quick to jump to conclusions and subscribe to so many publications, services, and gurus that I didn't give my correctness enough time to prove its worth, even in the cases where I was accurate. My panic was exacerbated by self-doubt, excruciating worry, and needless stress in an already troubled marriage. and the eventual deletion of my whole account.

I made wise purchases and short sales throughout it all, but my convictions were never particularly strong, I couldn't handle the volatility of high-tech companies, and I had no notion whether to hold onto and when to sell my position. Usually, I would hold onto losers for much too long and discard winners at the worst possible moment. I experimented with system trading, but I got tired with back-tested strategies that didn't function in real time. I lost everything—my marriage, my house, and my confidence—and I became bankrupt.

I started poking around the market again around 2001. Currently, though, I lacked any cash to exchange. But I could recall a moment at the end of 1999. When I had profitably traded GE multiple times, it was in a good upward trend with just the right amount of dips to present opportunities for purchases and just the right amount of sells. I started to question my ability to profitably purchase and sell large-cap stocks. I started going over charts once more; with the Internet, it was now simpler and could be done for free. I looked at well-known brands as well as less well-known brands that consistently have capitalizations above $5 billion. I started paper trading in 2002 utilizing a few simple indicators and some snap decisions I had made regarding chart formations. I completed this in real time.

I was going through a costly divorce and didn't have any money to trade, so I was very much broke for three years. I continued to trade paper because I was still captivated by the concept of employing large cap companies. Large caps, in my opinion, have these benefits: one is that they are valuable, not just sky blue. Biotech and high tech companies so often offered only future profits. Big caps had actual value, actual assets, actual income, etc. Data on them was easily accessible. I discovered in the 1990s that I will never have access to the most recent stock information. Large caps, however, negate the necessity for it. Additionally, large caps charts were more dependable and predictable; ups and downs were always within predetermined bounds. Rumors about high tech could fall from the sky like a rock; at the end of the day, I wouldn't even be aware of them.

Was the volatility high enough to allow for large-cap trading? I needed actual activity, not just buy and hold strategies that promised a 7% return for the next ten years. However, what I discovered is that, provided one can learn to forecast it, there is sufficient volatility. Think of my purchase of the All-State Insurance ticker symbol ALL, which was my first actual trade of the year. When I purchased it in March 2005, its 52-week low was 43 and its peak was 52. A 20% yearly return would have been earned if you had purchased it at the exact low and sold it at the exact high. Not bad for an investment this safe. Of course, that isn't feasible. However, it is absolutely feasible to keep it for approximately 39 days and earn roughly 3% over that period. For a relatively short period of time, that is nearly a 30% yearly return on a very safe asset. That's exactly what I did.

Over a three-year period, I achieved an average return on investment of over 50% through paper trading large-cap stocks. I stashed money, saved, and crunched every penny until I had a staggering $3000 to create a stock account. After that, I purchased All State. Again, my goal for this year is to earn a return on investment of more than 50%—but in actual money. which, I can assure you, is far more thrilling than trading on paper. Yes, I have established a profitable side company, which I deposit into my account. However, more on this at a later time. Live trade updates are available on my blog at http://livingonlargecaps.blogspot.com. And observe as I try to demonstrate in real time that you may benefit handsomely from large-cap stocks.

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