Why I Am Content That I Sold Apple And Gave Up Trading

by: SA Editor Rocco Pendola

I've been an avid follower of, and investor in, the stock market, in one way, shape or form, since I was a teenager. This means I have been at it for more than 20 years.

It has been quite a journey, but it's never been more exciting than it has been over the last 18 months. Long story, short, I really became obsessed with the stock market over the course of the last 12-13 years. Living in San Francisco during the dot-com boom (and bust) kicked things into high gear. When I wasn't working a day job or going to school, I was studying various facets of the market.

In 2010, I decided I should day trade stocks. This decision prompted me to drift away from what I had been doing over the course of the previous 20 years: Investing in dividend-paying stocks, reinvesting the income and, over the final five years of that span, using basic options strategies. I also veered away from that course temporarily while chasing IPOs in 1999-2000.

I failed miserably with the IPOs, but actually did alright day trading. Then, thanks to the magic of this incredible community called Seeking Alpha, I met Robert Weinstein. Bob is a conservative hippie from Wisconsin, who has been making money - as in, a good living - day trading, full-time, for the last six years. He's been investing successfully for decades.

When I visited Bob's day trading chat room, we got to know one another. He picked up on my previous career in radio and my then- and still-current career as a writer. He politely told me that, while I might be able to do well as a day trader, the odds were stacked against me. He had seen enough people enter the chat, only to never be heard from again after blowing up in a few short weeks or months. He encouraged me to take my knowledge and passion and writing career in the direction of SA.

I've been writing on Seeking Alpha for more than a year now and I can say it's the best move I ever made personally and professionally. The shift Bob advocated also made me a better investor. Giving up that urge that many of the stock market-obsessed have to day trade has paid dividends ... literally.

The Material and Psychological Benefits of Income Investing

Looking back on over a year writing for Seeking Alpha, I am happy I have the Netflix (NFLX) and Research in Motion (RIMM) short calls to fall back on because I, undoubtedly, made the worst call of 2011, in April 3rd, in Why I'm Selling Apple:

AAPL closed at $344.56 on Friday in a week that saw it range from a low of $343.30 to a high of $354.32. While I hardly view the stock as a worthy short candidate, I don't believe the payoff from continuing to hold the shares will match the upside I have already seen. I bought most of my shares around September of last year between $266 and $286.

I ended up selling Apple (AAPL) for a 27% gain, potentially leaving another 79% or so increase on the table.

When I was trading, I broke several items in my house. If a trade did not go my way, I usually stayed disciplined and got out to avoid significant losses, but it made me angry to lose. On winners, I often got greedy, acted without discipline, refused to sell and ended up trimming my profits, breaking even or selling a loser. Bottom line, unlike Weinstein, I am not cut out to be a full-time trader.

Over the course of the last year, I have come full circle, again, and keep about 75 to 80% of my portfolio in dividend-paying growth stocks. I do this via several brokerage accounts and a few DRIPs. These holdings include Bell Canada (BCE), Becton, Dickinson and Company (BDX), iShares MSCI Canada Index Fund (EWC), Intel (INTC) and Time Warner (TWX).

I reinvest all income and frequently write covered calls, cash-secured puts and buy long-dated calls to complement many of these positions.

The remaining 20 to 25% of my portfolio sits in cash, a target date mutual fund and speculative stocks such as Pandora (P), Cumulus Media (CMLS), Wendy's (WEN) and a small position just opened in Nokia (NOK).

I'm back to the course I've followed for most of my life - save the day trading tryst - which consists of the "boring" routine of saving and investing as much of what I make as I reasonably can. When I get a check or ACH, I pay the taxman and promptly put most of the rest to work for me. I firmly believe that most of us who have a thing for the stock market end up much better off as investors rather than traders.

Materially, I have seen the size of my portfolio add up more quickly than it ever has. And definitely more quickly than when I was putting all of my cash on one 15-minute day trade. Plus, I do not break things around the house during the day anymore and I have much more fun with my wife and kid at night.

When I wake up at 5:30 in the morning and rush excitedly to the computer, I do it because I am love to write, invest and see which one of my stocks pays a dividend that week, not because I have my fingers crossed hoping that a trade I held overnight does not turn against me.

I've literally watched myself transform into a calmer and all-around richer person over the course of the last year. Robert Weinstein and Seeking Alpha deserve a lion's share of the credit. But, I also give myself the occasional pat on the back. I am in no mood to fret over money left on the table or to chase AAPL during these potentially volatile times. I'm more than content being a boring, old buy-and-hold, dividend-stock loving, growth and income investor who likes to take part in a little worthy speculation on the side.

I get plenty of emails from folks looking to step up the self-management of their portfolios. Most want to use basic options strategies to make it happen. Every week or so, though, people write and throw out these fantasies of day trading or making insanely, low-probability options trades ahead of earnings. Hopefully, they end up feeling as well-served as I do when I relay to them the advice Robert Weinstein hit me with more than one year ago.

Disclosure: I am long BCE, BDX, CMLS, EWC, INTC, NOK, P, TWX, WEN.

Additional disclosure: I am long NFLX June $40 put options.