Shifting Investments March Madness

As March begins I have begun shifting my investments out of my losing investments and into better performing investments.  Last week I made a poor decision to take the 3rd position in Lumber Liquidators (LL) in my Robinhood brokerage account.  You can read more about that here. The number one reason I did this is, I had an emotional attachment to the stock.  LL was my first purchase last May when I began this experiment.  I truly did believe there was a good chance of a strong earnings report that would result in short-term profits.  It ended up being the opposite and I lost over $50 on that transaction.

This week as the LL stock price recovered and the rest of the market rallied, I decided it was time to sell.  I made the following transactions using limit sales:

E*Trade IRA, sold 71 shares of LL for $25.00 each.  Total sale $2,082.99, loss of $733.19.
E*Trade Brokerage, sold 18 shares for $25.00 each.  Total sale $443.03, loss of $34.17.

Remember, when you trade, you will not make money on every transaction.  Knowing when to cut your losses and get out is an imperative skill that I am working hard to hone.  The goal is to win more than you lose.  Don’t kid yourself into thinking you will never make a bad transaction.  Everyone that trades makes some losing trades.  Time will tell if this was the right decision.  I believe it was the right time because of my emotional involvement.  Trading on emotion is always wrong.

New IRA Strategy

As for my individual retirement account (IRA), I have been shifting that portfolio into investment funds and out of individual stocks.  You can see all my portfolio’s current holdings here.  My year-end goal is to have 75% in the mutual fund PRGFX and 25% in the ETF MJ.

PRGFX has a 5-star rating from Morningstar.  It holds stock in Apple (APPL), Amazon (AMZN), Microsoft (MSFT), Google (GOOG), and Boeing (BA), to name a few.  I like this for the long term as it has a strong history of good growth beating the market consistently over the past 10 years.  The only downside that might affect investors is, it has a minimum investment of $2,500.  If you are not at this level yet you can always find an ETF that you can purchase as little as 1 share of.  Here is a list of ETFs to consider.  I will not make any further recommendations since I am not personally invested in any of them.  I will only name specific funds and stocks that I have personally invested my hard-earned money in.  That is one of the core principles of this blog.

The MJ ETF holds stock in many cannabis-related stocks both here in the states and in Canada.  It has struggled to gain much since I invested at the end of January (side note it was called MJX when I initially invested).  Sometimes they will change the symbol of an ETF, not sure exactly why but it doesn’t seem matter at this point.

Cannabis Stocks Gamble

Cannabis stocks surged at the beginning of the year but have since levelled off and begun retreating.  The reason for the surge was a host of new laws taking effect that legalized the medical and recreational uses in different states across the country and in Canada.  There is still much uncertainty, which has caused the stock prices to stall for the time being.

The federal government still classifies Marijuana as a Schedule 1 narcotic, which defines it as having no medicinal purpose and making it illegal to even consider for medical and research purposes.  As you are well aware, many states have passed laws directly contradicting this.  Many countries across Europe have been studying it and there is much evidence that proves it does have significant medical benefits.  The Obama administration issued what is known as the Cole Memo.  This memo stated that federal law enforcement will not prosecute those in full compliance with state laws.  The feds would only prosecute for a marijuana offence if there were other laws broken, too.  This essentially provided a free pass until the end of the Obama administration.

Administration Change

The Trump administration has rescinded this memo, stating that they would give no special treatment to anyone in violation of federal laws.  The justice department has not begun making arrests or prosecuting any offenders who are in compliance with states laws.  The move seems largely symbolic right now but has left the door open for federal raids in the future.  There are 2 strong indicators that the Trump administration will leave it as merely a symbolic move and not make moves to shut down the industry.

The 1st is that marijuana producers and retailers pay federal and state taxes and no government is looking to reduce their income.  The federal government has cashed every tax payment check that producers and retailers have sent in.  A crackdown on the industry would stop these payments, therefore, reducing federal revenues and increasing the deficit.

The 2nd is that the justice department has not allocated any money to investigate and prosecute the industry.  Without money, you can’t stop the process.  Government and businesses must allocate money in order to take action.  As individuals, sometimes we can take action without investing any money, we can invest our time instead.  Organizations don’t have this luxury, time is money.  If an organization wants to spend more time on something, it must spend more money.

My Take

Considering all these factors, I believe the industry will continue to operate in this ambiguous grey area for the foreseeable future.  I expect the country to continue to allow both medical and recreational use and keep collecting taxes.  Money makes the world go round and if you follow the money, we are shifting toward more tolerance of cannabis in our society.  It will take an act of Congress to allow full legal status.  Presidents don’t write laws, they interpret and enforce them.

The Short-Term Profit Experiment

Over the past few weeks, I have begun making small trades with my Robinhood brokerage account in an attempt to make short-term profits.  I left off last week with AMD set to sell when it met the target price of $12.00.  On 3/5 this happened and I made a net profit of $15.53.  Bringing my experiment to a net profit of $2.38, finally erasing the loss I endured with the LL trades I talked about earlier.

I set a limit buy order for 78 shares of BBG for 4.80.  This executed on 3/6, total cost was $374.40.
I set a limit sell order for 78 shares for $5.00.  As of this writing the sale has not executed.


This month I will be diving further into Cryptocurrencies and watching the Spotify IPO.  So check back soon and share with your friends.  Don’t forget to follow this blog if you haven’t already!

Thank you for reading!  Happy Trading!!

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