Increase Your Portfolio Size | Podcast Episode #499

0:00
Hey everybody, this is Ryan Mallory with shareplanner.com’s Swing Trading the Stock Market. And today’s episode we’re going to be talking about whether you should be dramatically increasing your portfolio size when you have the opportunity to do so. And today’s episode comes from a person who’s been working for a company recently had to quit the job and take a severance package, whether or not to take that severance package and add it to his portfolio, swing trading portfolio.

0:25
So I think it’s a pretty good question that I think a lot of people, maybe not from a severance package standpoint, but just in a sense of it may come across a lot of money. Maybe it’s from a tax refund, maybe it’s from a death in the family or something. But often times throughout life, you know, there, there might be an opportunity where we get a bonus or we get a, a chunk of change back that we weren’t expecting and we don’t know what to do with it.

0:46
So the first thing that comes to mind is, well, I like to trade stocks. Let’s go ahead and put in My Portfolio and try to make even more out of it. And is that the right decision? Or is there a better approach to it? And that’s what I’m going to be talking about here today. Now a little bit of housekeeping. I’m going up on my 500th episode.

1:02
I’m halfway to the number of episodes that I would like to do for this particular podcast, at least love to be able to one day reach that 1000 episode mark. I don’t think a lot of people do that per SE, especially doing it at the frequency which I’ve been doing it. I’ve been, I started this podcast episode back in 2017, so 8 years and running.

1:19
There’s been a lot of lessons and a lot of a lot of improvements even in my own training that I’ve been able to chronicle throughout this podcast. But what what I want to do, and I do this with every big podcast milestone, whether it’s 400 or 500 or three or two, but what, what I’m going to be doing there is, is talking about what I’ve learned since the 400th episode.

1:42
And so there’s always lessons learned throughout the time because there’s a pretty good amount of time that that lapses in between episodes of that many. And there’s always lessons that you’re learning. I, I don’t care how long you’ve been trading, you’re still learning lessons from the stock market. And I’m always learning it.

1:58
I, I learned from others. I learned from my own experiences, from my own mistakes. And I think there’s always areas that if you’re reflective, you can see where you’ve been able to improve and some of the lessons that you’ve been able to learn during that time. So make sure to listen next week to that particular podcast episode.

2:14
Now, I don’t like to give people, I, I don’t like to use people’s real names in my podcast. I always give them a fake Florida redneck name just because you never know in 10 or 15 years whether they really want their name associated with the podcast. So I don’t want them to have any regrets for having written the podcast at a much earlier time.

2:33
So I give them a good Florida redneck name. This one’s going to be Butch. There’s a lot of butches that that I knew growing up. And so, Butch, he writes, I left my AI company that I was working for under political pressure, debating taking my severance pay about $70,000 after taxes and adding it to my swing trading portfolio.

2:55
Corporate politics sucks man. Thoughts. You don’t have to answer here, but maybe it would be a good topic for the podcast. Well, obviously I’m doing the latter. I think it makes a great topic for this podcast episode. And one of the things that I would say, and I’m not going to spend too much time on this, but corporate politics is absolutely the worst.

3:12
I was, I was in corporate America not a long time under a decade. I was out of college. I started working for a defense contractor and I hated it. I mean, I remember doing all the things that they tell you to do and you could save the company, you know, $3,000,000 and they will give you a 3% pay raise.

3:32
And you’re like, golly, I saved you all this money. And I’m, I’m getting, you know, not even sometimes 3%, sometimes it’s like, oh, here’s a 1 1/2 percent bonus and your pay stays the same next year. I mean, it was just brutal. And you knew that they were making tons of money, money hand over fist and they still are. But you know, they, they don’t value their employees.

3:48
And I think that’s one of the probably the most difficult parts of, of corporate America is they don’t value their employees now. And, and you’re seeing that where companies are choosing, you know, buybacks and they’re like Apple or, or any of those mega cap stocks, NVIDIA, they’re buying back their stock rather than maybe investing in it and, and their own employees and, and really trying to promote them.

4:10
I mean, that’s not all the case. I mean, you see the other extremes where Meta is paying people like they’re professional athletes, like $250 million. So there’s, there’s definitely both sides of the coin there that you have to consider, but it is the worst I, I think when there’s so much at stake, particularly in these AI companies, there’s a lot more cutthroat mentality that that they’re dealing with.

4:32
And obviously Butch is dealing with that here in the AI company that he’s working with. And, and having to leave over political pressures does stink. Now he has a $70,000 severance pay, which I think a lot of people never will see that much money in a severance package in their lifetime, which is awesome.

4:48
You know, if you’re looking for a silver lining, I don’t think ever having to quit a good job is, is, is a good thing. But there’s, there’s opportunities of what to do with the $70,000. You know, maybe it’s to pay the bills. But in this case he’s looking at adding it to a swing trading portfolio. Now is that a good idea?

5:06
Huh. I don’t that’s, I think a lot of it has to do with perspective. You have to have the right perspective on it. If you’re dealing with $1,000,000 portfolio, is a $70,000 increase going to be all that dramatic for you? It’s about 7% increase.

5:23
So I don’t think that’s a a massive increase right there. Is it that I don’t think that’s a bad idea because you’re not talking about dealing with an insanely large amount of money versus what you already had in the portfolio.

5:39
But if you’re talking about a $10,000 portfolio and you’re going to say, hey, let’s go from 10,000 now to 80,000 by increasing it by 70, that is pretty dramatic. Yeah. I mean, you’re 8 Xing or 7 Xing your portfolio. That’s going to introduce a whole lot more problems for you as a trader.

5:56
And even if you’re going from like 50,000 and adding another 70,000, you’re still doubling the size of your portfolio. And I think still there’s, there’s some pressures that come with that. So we want to be cognizant of that. We don’t want to act like it’s not a big deal. A lot of times if we’ve had success in the market, let’s say we’re trading a, a $10,000 portfolio and we’ve had some success.

6:17
Let’s say we’ve taken that $10,000 portfolio and it’s now $15,000. Now we’re all of a sudden thinking, well, I have you know, $50,000 sitting in the savings account here. What if I just scooched that over and to my swing trading portfolio because in doing so, instead of like making only $5000 this year, man, I could, I could be walking away with 30,000 because you take the 10 and the 50, you got 60,000.

6:39
You get that same return all of a sudden 30. But now what most people find out that happens is they don’t get that because they’re trading with a much bigger portfolio. And as a result there’s more emotions, there’s more emotional connection to that capital.

6:56
That’s why it’s so easy for traders when they’re paper trading to be successful because they don’t have anything at stake. And if you start off with $1000 in your portfolio, you’re probably not going to have too much of a problem going Yolo on your portfolio. And then if you get like a 50% return, you’re going to think, well man, do you see that?

7:14
I got a 50%. Obviously I know what I’m doing here. So then all of a sudden they add a lot more to their portfolio and they take that same mentality and approach. And then their emotions are all a lot of whack. They’re making bad trading decisions both when they’re getting in and how they’re getting out, and everything just blows up in their face. And that’s what we got to try to avoid as traders.

7:32
We don’t want our trading to blow up in our face. And one of the surefire ways to do that outside of managing the risk is and rapidly increasing your portfolio size. So I don’t know how much this particular person is trading with. I don’t know if it’s a $10,000 account, $100,000 account, or $1,000,000 account.

7:51
It’s much easier to go from 100,000 to 170,000 from a mental standpoint than it is from 10,000 to 80,000 from a mental standpoint, because the emotions are going to be so much larger because you’re making such a big percentage leap in the in terms of how much assets are under your management.

8:09
So you have to be careful with how much you’re doing with that. So here’s what happens when you’re dealing with losses, you’re much more likely to be emotional about those losses. So you were trading before with a $10,000 account.

8:25
Let’s say you were putting 20% on each trade, that’s 2% or $22,000. And if you take a 5% loss on that particular trade, let actually let’s just say it’s a 10%, makes the math a whole lot easier. If you take a 10% loss on that trade, you’ve lost $200, right?

8:43
It’s something that you can recover from that you know you can probably recover from with relative ease. Maybe you make that in a single day from a work standpoint, so you’re you’re not sweating that too much. But when you go from $10,000 to an AD 70,000 and now you’re dealing with 180 or dealing with 80,000 and you put 20% down thinking that you’re going to manage the stock that the exact same way.

9:06
Well, 20% of 80,000 is now $16,000. So you take a a 10% loss, that’s $1600. And let’s say you take them back-to-back then all of a sudden you’re down 3200. You can start to feel some panic over there. You’re like, oh crud, I’ve never lost this money ever.

9:24
We talked about how you shouldn’t dollar watch in trading. And I’m a, I’m a firm believer. Don’t, don’t watch the dollars because if you’re up on a trade and you see yourself, hey, I’m up three $400.00. I can pay for, you know, property taxes this month or I can pay for my one of my kids college classes this month.

9:39
You start to personalize it and it’s the same thing. And, and so when you personalize it, it’s in my next point. When you personalize it, you’re more likely to get out at the wrong time. You’re looking at it from a dollar standpoint, not whether or not the chart says there’s still more room to go and you could be forgoing a lot more profit that could have been easily had.

10:00
I’m in a trade right now where the final leg of my trade is up over 70%. I’m not looking at the dollars on it because I don’t want to personalize it because I know that that it’s, it’s a lot, a lot of money for one individual trade. And if I start to look at it, it be easy to personalize that money so I don’t look at that money.

10:17
Now. The same thing goes with losses. You start losing that money, you’re like, Oh my gosh, I just, I just basically blew up an entire month’s worth of rent. Like instead of doing that, I could have just gone, had an incredible time in in Vegas this past weekend.

10:33
Instead, I just completely ruined it on a stupid trade that I probably shouldn’t have taken. And it’ll always feel like a stupid trade when you lose on it and it losing trades aren’t stupid. They’re part of the game. But when you lose a lot of money, they’ll feel very stupid. Regardless of how well you manage the trade, it’ll feel stupid.

10:50
And so here, just because you can doesn’t mean you should. It’s like that old dress, Jurassic pop, Jurassic Park quote. I can’t remember the guy’s name. Jeffrey Dunham, I think was the actor. Did I say that name right? Possibly. But he he said to him, he’s like, just because you can doesn’t mean you should.

11:11
You know, you were so busy figuring out whether you could do something, you didn’t stop to ask whether you should do something. And so it’s the same thing when you can increase your portfolio, you’re looking at what you can make from it, but you’re not necessarily thinking whether or not you should or that you’re capable of handling the emotions that come with that kind of increased position size.

11:32
And like I said earlier about the dollar watching, when you’re dealing with your winners, you’re, you’re still facing the same thing when your dollar watching, you’re more likely $2.00 watch, of course, but you’re also going to personalize everything that’s taking place. You’re like, holy cow. Even if you’re not dollar watching, you know, by simple math, probably how much you’re up.

11:50
And it’s probably something you should try to avoid in general, but but people will do it. And then they’re like, oh man, I’m up 3000. I can cover my next two months of mortgage or I don’t know if mortgages go that cheap anymore, I could pay for the next month’s rent or pay for the next mortgage month.

12:09
And so you start thinking about that and then that’s what you’re that now. Does the market care what your mortgage is? Does it care if you’ve made enough on the trade to cover a mortgage? No. And so even when you’re dealing with winners, you may be foregoing greater profits just because you have an emotional tie to the dollar amount that that trade is now worth.

12:29
So that is why I’m not a huge fan of rapidly increasing your portfolio size. And so whether you’re dealing with winners or losers, there’s a lot of emotional decision making that that can impact your trading when you’re going overnight increasing your portfolio by a large amount.

12:46
Now again, if you’re dealing with $1,000,000 portfolio and you’re, let’s say you’re putting 10% on every one of your trades, OK, So you, so now you’re going from, you know, $100,000 on a trade to $107,000 on a trade. That’s not going to be all that big of a deal.

13:02
OK. I don’t, I don’t think you’re going to lose sleep over that size increase, but there’s a good chance that we’re not dealing with $1,000,000 portfolio that we’re dealing with something that’s far less and it would be a significant amount to trade with versus what Butch was trading with before. And if that’s the case, he’s got to recognize the fact that there is a lot more emotion that’s going to be creeping into a straight.

13:25
And like I said, you got to keep the emotions out of the trade as much as possible. Is it, can it be completely kept out? No, but you’ve got to be able to recognize it though too when it does creep. And I think that’s one of the things that, that I, I excel at is that it’s not that emotions stay out of my trades. I feel emotions just like anybody else, you know, But I think I recognize when those emotions are coming into it because I can look at the charts, the technical analysis and I can, I can honestly ask myself, is this something that I should be basing my my trade off of?

13:56
Is the charts confirming what the emotions are that I’m feeling? And most of the time it’s not. And so I need to go off of the charts. One of the other things that I would recommend if you’re trying to figure out the emotional side, as well as everything else that comes with trading is myself made trader course.

14:11
This is my flagship course. It details, and it’s just something I just recently launched details. Everything that I know about trading over the last 30 years, everything that I’ve learned, I’ve put it into this course and it’s over 25 hours of training videos. It’s a lot. It’s very, very intense. Not everybody’s going to be able to handle it, but if you’re serious about swing trading, if you’re serious about getting the most out of your swing trades and really being able to maximize your talents as a swing trader, I really think this course is for you.

14:39
Check it out. You can go to shareplanner.com. You’ll see at the top there will be a thing that says trading Academy. You click on that, you go to the self-made trader and you see if that course works for you. I, I think you’ll like it. If you’re you’re serious about swing trading and you want to really maximize your potential, that’s the course for you. So any case, let’s get back to the podcast episode.

14:57
I want to talk about that forever, but I see this a lot, this mentality of wanting to rapidly increase. I’ve gotten it a lot on this podcast where I’ll get the emails about, you know, hey, you know, I’m starting with, you know, $100.00 of trading in. And there’s not a lot that you can do with $100 in terms of the number of shares that you can buy.

15:15
Cause a lot of stocks trade for well over $100. But they’re talking about, you know, OK, but this time next year when I get my tax return, I’ll go from $100 to the $3000. Now, is that considered the same kind of dramatic increase? No, because it’s still considered a small portfolio, though I would try to be really good at maybe trading with $100.

15:37
I mean, if you can succeed with that $100, you set yourself up and, and, and again, I think $100 is kind of rough to start with. But if you can start with a few $100 or $1000 and then you can increase it to $3000. Remember, when you’re trading with really small dollar amounts, your goal is not to get rich.

15:55
Your goal is to learn how to swing trade without making mistakes that will dramatically impact you. Because when you’re trading in the very beginning, you’re going to make mistakes. That’s just part of trading. Even as a seasoned trader, I still make mistakes, OK, and usually I catch them now, but I still make mistakes along the way.

16:13
It could be something as simple as I should have put the mark or as a limit order. I accidentally put a market order. You see it on the charts all the time too, when you see some fat-finger order from an institution that crushes the stock out of nowhere for no reason at all. So it’s better to make mistakes with small accounts.

16:31
And the other thing I would say, it’s not that you can’t eventually go from like a $10,000 or a $20,000 account to an $80,000 or a $90,000 account by increasing your portfolio by $70,000, but it’s probably better to do that incrementally. So what I mean by that, let’s say for instance, you’re working with a $10,000 portfolio, well jump it up to $15,000.

16:52
OK, so now you’ve increased it from $10,000 to $15,000. Yes, you still got $65,000. There’s plenty of money-market accounts out there right now, can’t say about this for the future, but for right now it’s paying 4%. So you can still be making money on that while you’re trying to gradually get familiar with the larger position sizes.

17:12
Because, and I’ve used this illustration for, you know, jumping in at market or trying to call market bottoms and referring to it as testing the water with both feet. But in the same way, dramatically increasing your position sizes is like testing the water with both feet too. You do that, you’re going to sink to the bottom.

17:29
And so that’s what we’re trying to avoid is not throwing the whole enchilada because you may find going from $10,000 to $15,000 was a lot harder than you thought. There was a lot more emotional frustrations that came along with it when you had a losing trade, and maybe you were too quick to get out of a trade when you were up 10% on a trade but you should have let it run longer.

17:52
That’s things that you can find out along the way without having to find out that same lesson by trading with $70,000 more. Instead, you’re finding it out by just increasing it by $5,000. If you don’t feel the emotions behind it and you’re doing pretty well and after, like, let’s say four or five months, yeah, go ahead, increase it some more.

18:09
I would, I still wouldn’t go up to $70,000, but I could see where you could want to increase it some more. Go, go up maybe by another $10,000 or $15,000 and just gradually increase. Time is on your side. And so we want to make sure that we’re not putting ourselves into

18:26
Well, we want to make sure we’re not putting ourselves into a bad situation. But the other thing too is you could be increasing your portfolio size at the worst possible time for, you know, trying to adapt your emotions to that increased position or portfolio size. Let’s say you’re doing it right at the market top and all of a sudden the positions all start going away off, you know, falling apart and all of a sudden you’re losing all that money, you’re panic selling because you’re not used to managing that kind of money.

18:51
That’s what we have to avoid. We have to avoid the emotions that come with the rapid increase of a portfolio size. Now, if it comes through trading, let’s say you know, you get into, let’s say you have $10,000 in your account and all five stocks you put in there for 20% position sizes go up to 100% each.

19:11
Now, is that likely to happen? No, but would that be necessarily a bad thing when you’re dealing with that kind of percentage increase into your portfolio? Possibly. I mean, there’s the chance that you’re not quite still equipped even though you might have had a streak of incredible luck or blessings and jumping into the market with that kind of a position size going forward, you may not be emotionally equipped for it because when you originally got in before those larger gains, it was with a much smaller position size.

19:45
Now you’re doubling or tripling those position sizes from a dollar amount. Even though the percentage amount might be the same, you still may not be in the right frame of mind. If you’re trading with a $1,000,000 account, you’re probably going to be trading smaller position sizes than if you were trading with $5,000 of assets under management.

20:05
And that’s just really the crux of the matter is that the more money that you’re trading with, the more emotions that are going to be equipped. And so your position sizes may have to change as a result. It’s better to increase incrementally, you guys, and add some along the way. Be cognizant of the fact that if you rapidly increase your portfolio size, you’re introducing a host of emotions from yourself that you may not be ready for.

20:23
Now, if you enjoyed this podcast episode, and I hope that you did, make sure to leave me a five-star review on whatever platform that you’re listening to me on. That would be very much something that I appreciate. Let me know down in the comments on whatever platform you’re listening to. What is your theory about this? What’s the largest amount that you’ve ever increased your portfolio size and how did that turn out?

20:40
We’d love to hear from you guys. I’d love to get some feedback from you on that. Make sure to check out the Self-Made Trader. You can get that at shareplanner.com. Also send me your questions, ryan@shareplanner.com. I’m the only one that reads them. I’m not going to let anybody else read them. And I won’t use your name in a podcast episode. You guys have been great about sending me some questions here of late.

21:14
And remember, this is what feeds the show. The questions that you guys send in, that’s what I try to base this whole podcast around. And remember, one more final thought. OK, Mark 8:36, for what shall it profit a man if he gains the whole world and loses his own soul?

21:31
Jesus is the reason for everything. Find Him and you’ll find life. Thank you guys and God bless. Thanks for listening to my podcast, Swing Trading the Stock Market. I’d like to encourage you to join me in the SharePlanner Trading Block where I navigate the stock market each day with traders from around the world.

21:48
With your membership, you will get a seven-day trial and access to my trading room including alerts via text, email and WhatsApp. So go ahead, sign up by going to shareplanner.com/tradingblock. That’s www.shareplanner.com/trading-block and follow me on SharePlanner’s Twitter, Instagram and Facebook where I provide unique market and trading information every day.

22:09
If you have any questions, please feel free to email me at ryan@shareplanner.com. All the best to you and I look forward to trading with you soon.