My 1st Million At 33 – yes, you can do it too

If you look at my stock portfolio, it mainly consists of the followings:

1. Precious metals.
2. Energy dividend stocks that pay significant dividends (> 6.5%).
3. Other energy stocks.

I almost use my dividend stocks as a way to park my cash.  Although they still go up & down, the beta is still less than non-dividend energy stocks, which has yet a lower beta compared to precious metals.  I have been selling some energy dividend stocks to raise cash for more stakes in precious metals.  Re-balancing the portfolio is consistent with the spirit of Kelly Criterion: you bet more when the odds favor you more, and you should bet less when the odds favor you less.  Here I interpret odds as how high or low the market is relatively speaking.  Of course, the basic assumption here is that the particular sector or market will revert its level in the long term.  Similarly in the time averaging method into market, the same assumption must be true too.  If the market or the particular sector doesn’t go up in the long term (or in one’s lifetime or one’s affordable patience), buying when the market goes lower simply doesn’t work.  For the vey same reason, you should not do averaging on an individual stock basis.  If you do, you should do it extremely selectively and sparingly.  Personally, I seldom do averaging for the same stock.  If I do, I tend to sell off the part that I average when the market snaps back.  95% of the time, I simply acknowledged my wrong selection (or wrong timing) and won’t aggravate my same mistake by further averaging.

With further drop in precious metal and energy market today, my total cash is almost at 51% to my stock portfolio, although my usable/employable cash is only at 31% of my portfolio.  I have been moving and cleaning my spare cash balances in my bank accounts to increase my “usable” cash.  I may consider to borrow the idle cash out of my 401K account to increase my usable cash further.  If the precious metal drops more, I can almost double down my bets, except that I don’t think it will be such a terrific idea.  Later (or sooner the better), I need to devise an allocation plan for my cash to be splitted in between energy, precious metal markets, and miscellaenous things.