The ultimate flexible 'split personality' trading system?

[StumpyPhantom]

I thought I would canvass the learned views of ASF members on this strategy, aimed at resolving the essential conflict between the buy/hold investor and day trader (ie. short term vs long term), that allows you to apply any stop-loss rule you want whilst still having the benefit of taking the long view. More importantly, it might allow you to continue profitable trading and eliminating losses over the longer term.

Feel free to critique it. Tear it down if you want to, because I'm not totally persuaded either. BTW - none of this helps you with picking the right stock. A dog's always going to be a dog.

This system requires you to have a personal account as well as an SMSF account.

So here goes.

Step 1. You buy a stock (easy enough).

Step 2. If the SP tanks down to a level that you would like to set a stop-loss, you do an Off Market Transfer to your SMSF (and your SMSF pays you for it at that losing price).

Step 3. If the SP goes up, sell it whenever (after 45 days for day traders, up to 45 years for buy/hold) and take the profit.

So, your personal account lives to fight another day, using the cash from the SMSF to (hopefully) find a stock that will go up rather than stick long-term with a losing trade. If at least 50% of your stock picks go up, then your capital should continue to increase.

Whilst your SMSF, by its nature, is prepared to hold on to this stock until it eventually turns around and makes a profit compared to when you originally bought it.

You can act like a day trader in your personal account, consign your short term losses to your SMSF (which should eventually repair itself if you picked the right stock), and make short, medium or long term profits from your personal account.

A wise man once said "If it sounds too good to be true, then it probably is". So there you have it, do your best to pick holes in it.

 

[tech/a]

Terrible.
Sorry cant be bothered wasting time answering in detail.
Go back and REALLY think about what your doing---PUNTING!

 

[Trembling Hand]

You can act like a day trader.

LOL hardly.

 

[Julia]

What??? Your SMSF is still your money. Why on earth would you accept a poor result in that any more than you would in a different structure?

 

[StumpyPhantom]

What??? Your SMSF is still your money. Why on earth would you accept a poor result in that any more than you would in a different structure?

Yep - SMSF is still my money - though locked away long-term.

But is the SMSF accepting a "poor result" in buying a stock at a lower valuation than I personally did?

Surely the poorer result is my act of selling at a loss (ie. stop-loss), which is what is recommended so you can preserve some capital and live to fight another day?

 

[tech/a]

Yep - SMSF is still my money - though locked away long-term.

But is the SMSF accepting a "poor result" in buying a stock at a lower valuation than I personally did?

Surely the poorer result is my act of selling at a loss (ie. stop-loss), which is what is recommended so you can preserve some capital and live to fight another day?

Yeh
You get out of it to save your capital.
Then you sell it to you SMSF and let that cop any further loss. Brilliant.

All stocks recover past your initial buy point---dont they!

Ill bet you win all the "Pass the Parcel" !

 

[StumpyPhantom]

Yeh
You get out of it to save your capital.
Then you sell it to you SMSF and let that cop any further loss. Brilliant.

All stocks recover past your initial buy point---dont they!

Ill bet you win all the "Pass the Parcel" !

That was the reason behind my original comment:

"A dog's always going to be a dog"

This methodology wasn't really about picking the right stock (or at all).

But if the SMSF holds long-term funds, and can afford a short-term loss on a good stock, why wouldn't you do it if it frees up capital for your personal account?

And no - I don't win "Pass the Parcel" - can't remember the last time I got close in a chook raffle...

 

[CanOz]

I am doing everything in my powers not to write a thousand sarcastic comments about this topic.....Generally i try to stay out of these types of arguments, and they're getting a bit repetitious....:horse:

My : always treat your capital well....Your super should be holding the best dividend paying stock you can find if you intend to hold it for the long term This is no place to put waste. Considering you have been forced to leave it there for time, do yourself a favor and use the time well.

You have not considered for the worst case scenario, such as a 'OneTel', or 'Great Southern'.

Thats all i'm going to add for the moment.

CanOz

 

[peter2]

My understanding of this "strategy". You buy TLS at 4.00 (it doesn't matter why) and now see it at 3.00. You transfer these TLS shares to your SF at the original 4.00 price, which is payed to you. Now you have all your money back and pick another stock. TLS is sitting in your SF with an unrealised loss waiting for the revival.

My concerns:
Is it legal for your SF to pay you (also a member of SF - a related party) a price that is well above the market value?
Does your SF trust deed allow you to knowingly create an unrealised loss immediately?
Is this a sound investment plan for a SF?
Could this be interpreted as a benefit to a member of the SF?
Could this be interpreted as an early payout by the ATO?

There are severe penalties for doing the wrong thing in a SF.

 

[StumpyPhantom]

My understanding of this "strategy". You buy TLS at 4.00 (it doesn't matter why) and now see it at 3.00. You transfer these TLS shares to your SF at the original 4.00 price, which is payed to you. Now you have all your money back and pick another stock. TLS is sitting in your SF with an unrealised loss waiting for the revival.

My concerns:
Is it legal for your SF to pay you (also a member of SF - a related party) a price that is well above the market value?
Does your SF trust deed allow you to knowingly create an unrealised loss immediately?
Is this a sound investment plan for a SF?
Could this be interpreted as a benefit to a member of the SF?
Could this be interpreted as an early payout by the ATO?

There are severe penalties for doing the wrong thing in a SF.

No, sorry. My midnight explanation wasn't clear enough. The rules for Off Market Transfer of stocks requires 'arms length'. When you submit the form to your broker, it can only be for the closing price inside the last 5 working days.

So in your scenario, it's the $3 price for TLS that the SMSF buys it for. All above board. Your personal account only gets the $3 per share for your SMSF, and you get on with it, having made a $1 loss.

No unrealised loss, early payout or benefit.

Just your SMSF holding a suitable stock like TLS (I can't seem to rid the other posters of their sarcasm about the quality of the stock in the first place) whose share price in the longer term is projected to recover.

 

[peter2]

Well Stumpy, if you realise the loss in your personal account I find it very easy to join the sarcastic crew. It seems you have a dilemma between trading and investing. You want to trade (actively invest) in your personal account but can't suffer the draw downs and are happy to put shares in the bottom drawer in your SF hoping that time will fix your mistakes.

Sorry it won't work as the "peanut gallery" has implied. You'll find that you hold onto losers in your personal account much longer than you should. You need a different trading plan (including different risk management) for each account.