THE PLAN + Weeks 1 thru 5 Weekend Totals
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| Current account. Look below for weekly snapshots. |
Looking for a simple entry-level trading strategy? Below is a way that I use my Robinhood account. It is not complicated at all. Doing something is a thousand times better than doing nothing at all. Below is a baseline strategy (just an example. Just a starting point):
### My Trading Plan for building a portfolio on Robinhood: A Simple Yet Effective Strategy
Investing isn’t just about picking stocks—it’s about creating a system that works for you and sticking to it with discipline. Over time, I’ve crafted a trading plan for building a position in different stocks on the Robinhood app that aligns with my long-term financial goals. It’s straightforward, easy to execute, and designed to grow steadily. I want to share the details of my approach here, along with some insights into how I manage "tax lots" on Robinhood.
My Daily Buying Strategy
(In this blogpost I'm going to start by using BRK.B, but will add others later.)
Every day, I’ve automated a purchase of $10 worth of BRK.B shares through Robinhood. Automating this process allows me to stay consistent with my investments without having to micromanage the timing. This practice, known as *dollar-cost averaging*, helps reduce the impact of market volatility by spreading out my investments evenly over time. Regardless of whether the stock’s price is up or down on a given day, I stick to the plan.
How I Lock In Gains
On Friday I will pause my daily buy on each stock. This prevents me from getting tagged as a pattern day trader come Monday. Then, every Monday morning after the open I take a moment to review my "tax lots" in the Robinhood app. If I see any lot with a 5% or greater gain (depending on the stock because some move faster than others), I’ll sell only the original $10 worth from that particular purchase. By doing this, I secure profits while allowing the gains to remain invested in BRK.B (or whatever stock I'm working on). This approach not only grows my portfolio but also keeps me disciplined in taking incremental wins. You can use any size daily buy. I'm using $10 to keep it doable for more people starting out.
A Growth Plan
You can scale it over time. For every $100 of additional cash you add to your Robinhood account, you can increase your daily buy-in amount by $1. For example, if you add $100, your daily purchase amount goes from $10 to $11. This incremental increase ensures that as your investment grows, your contributions grow with it, compounding over time to maximize returns.
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What Are Tax Lots on Robinhood?
If you’re unfamiliar with tax lots, they’re an invaluable tool for managing investments with precision. Here’s a quick rundown:
- **Definition**: A tax lot represents an individual purchase of stock. Each lot has its own cost basis, which is the price you paid for the shares when you bought them.
- **Why They Matter**: When selling shares, tax lots allow you to choose which specific shares to sell. This can impact your tax liability, so having visibility into your tax lots gives you more control.
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How to Find Tax Lots on Robinhood
Robinhood makes it fairly simple to access and manage your tax lots. Here’s how to locate them:
1. Open your Robinhood app and go to your **BRK.B holdings**.
2. Tap the **Sell** button.
3. When prompted, select the **specific shares** option instead of the default first-in, first-out (FIFO) method.
4. Here, you’ll see a list of all your tax lots, showing the date and price of each individual purchase.
Using this feature, I can identify which lots have gains exceeding 10% and make informed decisions about which ones to sell.
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Why This Plan Works for Me
My strategy is built on simplicity and discipline. The combination of daily dollar-cost averaging, regular profit-taking, and reinvestment allows me to grow my portfolio without feeling overwhelmed. By scaling up my contributions as I add more funds, I’m ensuring that my investments evolve along with my financial goals.
This method has been working well for me, and I find it satisfying to stick to a plan that balances consistency with growth. What’s your investing strategy? I’d love to hear how others are navigating the world of trading!
This is a simple Dollar Cost Averaging system. Build it slowly so that you can learn along the way and never have too much risk involved. Try different indicators. These are just the ones I've settled on, and like.
Below is a screenshot of my weekly results. In the beginning I have/had several stocks and ETFs, but will narrow my trading down to just one stock, BRK.B.
None of this is financial advice. Just sharing a method that works for me, and you are free to use or not.
I will be sharing a screenshot each Friday of the progress. If I add cash, I'll show it at the bottom of the screenshot.
This account will have more than one stock eventually. My initial stock is BRK.B, and in the beginning youll notice other stocks in the portfolio. I plan to sell the other stocks once they are in profit. Check back weekly.
** Understand that there are may ways in which you can do DCA(Dollar Cost Averaging) The above example is just one way.
Scroll down to read the feedback from ChatGPT, Gemini, and Co-pilot A.I.
ChatGPT Says The Following:
Your trading strategy is well-structured, practical, and easy to follow, but there are a few areas where you might want to refine your approach for efficiency and long-term optimization. Here's my feedback:
Strengths of Your Strategy
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Consistency Through DCA – Your daily $10 purchases ensure that you’re consistently adding to your BRK.B position, reducing the emotional aspect of trading and benefiting from dollar-cost averaging.
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Profit-Taking Without Overtrading – Selling only the original $10 from tax lots with a 10% gain is a disciplined way to secure profits while allowing the remaining gains to compound. This approach aligns with a long-term growth mindset.
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Scaling Investments Over Time – Increasing your daily buy-in as you deposit more funds is a smart way to accelerate compounding without overcommitting upfront. This ensures that your investments grow in tandem with your portfolio size.
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Tax Lot Awareness – Many casual investors ignore tax lot selection, but your use of it allows for smarter tax-efficient selling. This is an underrated but powerful part of your strategy.
Potential Areas for Improvement
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Profit-Taking Threshold (10% vs. Higher Gains)
- Selling at a 10% gain may limit your long-term potential, especially with a slow-moving stock like BRK.B.
- You might want to test different thresholds (e.g., 15% or 20%) to see if holding for longer would maximize returns. Since BRK.B doesn’t pay dividends, you don’t have to worry about reinvestment loss like you would with an income stock.
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Reinvesting Profits Strategically
- Instead of withdrawing profits or letting them sit as cash, consider reinvesting them back into BRK.B immediately to maintain full market exposure.
- Alternatively, you could allocate a portion of profits to new opportunities if you ever want to diversify.
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Considering Volatility in Selling Decisions
- Since BRK.B is relatively stable, you might want to adjust selling frequency based on market trends rather than strictly selling three times a week.
- For example, during market dips, it might be beneficial to pause sales and wait for stronger recoveries before locking in profits.
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Exploring Covered Calls (If You Accumulate Enough Shares)
- If your position grows significantly, selling covered calls could generate extra income while holding BRK.B long-term.
- Robinhood allows this, but you’d need at least 100 shares to execute a covered call strategy.
Final Verdict: Solid Plan With Room for Optimization
Your trading plan is disciplined, logical, and well-structured, making it ideal for long-term portfolio growth. However, minor adjustments—such as testing a higher profit-taking threshold, reinvesting profits more actively, and being flexible with selling frequency—could improve results without adding complexity.
Gemini
This is a well-articulated and clearly defined trading plan. It demonstrates a disciplined approach to investing, which is crucial for long-term success. Here's a breakdown of its strengths and some points to consider:
Strengths:
* Dollar-Cost Averaging (DCA):
* Automating daily purchases of $10 smooths out market volatility and removes emotional decision-making.
* Consistent buying ensures you're investing regardless of market fluctuations.
* Profit-Taking Strategy:
* Regularly taking profits (10% gain) on specific tax lots locks in gains and prevents potential losses from retracements.
* Selling only the original $10 keeps the core investment growing.
* Scaling Mechanism:
* Increasing the daily buy-in by $1 for every $100 added provides a systematic way to grow the investment as capital increases.
* This is a form of progressive investing.
* Tax Lot Management:
* Understanding and utilizing tax lots allows for precise control over gains and potential tax implications.
* Robinhood's interface makes it relatively easy to manage these lots.
* Simplicity and Discipline:
* The plan is easy to understand and execute, which increases the likelihood of adherence.
* The automated and scheduled nature of the plan promotes discipline.
* Long term mentality:
* Using BRK.B is a great choice for a long term investment.
Points to Consider:
* Transaction Fees (if applicable):
* While Robinhood is known for commission-free trading, it's always good to double-check for any potential fees associated with frequent transactions. Even small fees can accumulate over time.
* Tax Implications:
* Frequent selling of tax lots will result in frequent taxable events. It's important to understand the tax implications of short-term capital gains, which are taxed at your ordinary income rate.
* Keep accurate records for tax purposes.
* Market Conditions:
* While DCA mitigates some risk, it's important to be aware of overall market conditions. Even BRK.B can experience significant downturns.
* Consider how major economical events might impact your strategy.
* Diversification:
* While BRK.B is a diversified company, it's still a single stock. Consider diversifying your portfolio with other assets to reduce overall risk.
* This plan is great for a single stock, but a well rounded portfolio is always better.
* Potential for Missed Gains:
* By selling at a 10% gain, you might miss out on larger potential gains if the stock continues to rise. However, this is a trade-off for locking in profits.
* Robinhood Risk:
* While Robinhood is a very popular platform, there is always platform risk associated with any brokerage. Make sure you understand the risks associated with Robinhood, and have a plan in place if Robinhood were to experience some type of failure.
Overall:
Your trading plan is well-structured and demonstrates a sound understanding of investing principles. By focusing on consistency, discipline, and incremental growth, you've created a strategy that aligns with long-term financial goals. Remember to periodically review and adjust your plan as your circumstances and the market environment change.
Co-pilot
Your strategy demonstrates a disciplined and well-thought-out approach, combining consistent investment, strategic profit-taking, and reinvestment. Here's some honest feedback, highlighting both strengths and potential areas for improvement:
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### **Strengths of Your Strategy**
1. **Consistency Through Dollar-Cost Averaging**:
- Automating daily $10 purchases ensures you’re investing regularly without the need to worry about timing the market. This helps reduce the emotional component of investing, which can often lead to poor decisions.
2. **Disciplined Profit-Taking**:
- Selling only when a tax lot gains 10% or more ensures that you’re locking in profits systematically. This approach allows you to capitalize on upward market movements while still leaving the profits invested for long-term growth.
3. **Scalable Growth Plan**:
- Increasing the daily buy-in by $1 for every $100 added to your account creates a proportional growth mechanism. This helps ensure that your investments scale up as your financial contributions grow, accelerating the compounding effect over time.
4. **Reinvestment of Gains**:
- Retaining profits in BRK.B helps amplify long-term growth through compounding. This is particularly valuable for a stock like BRK.B, which historically has delivered stable performance.
5. **Focus on Tax Lots**:
- Regularly reviewing tax lots provides you with precision and control over your trading. Choosing which lots to sell ensures better management of gains and potential tax efficiency.
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**Potential Areas for Improvement**
1. **Limited Diversification**:
- Focusing solely on BRK.B means your portfolio lacks diversification. While BRK.B is known for its reliability, diversifying into other assets could reduce risk and potentially enhance returns over the long term. You might consider adding ETFs or other individual stocks to balance your portfolio.
2. **Short-Term Capital Gains**:
- Selling tax lots based on short-term gains (less than one year) can result in higher tax rates compared to long-term capital gains. While this may not seem significant now, it’s worth monitoring how these taxes impact your overall returns. You could explore holding some tax lots longer for tax efficiency.
3. **Small-Scale Gains**:
- Selling only $10 worth of stock per transaction may result in relatively modest returns, especially in the short term. While this aligns with your long-term growth strategy, you might evaluate if slightly larger sale thresholds (e.g., $20 or $50) could streamline the process and maximize gains.
4. **Market Dependence**:
- The success of this strategy hinges on BRK.B’s consistent growth. If the stock underperforms or the market dips significantly, your profits and overall portfolio performance could be negatively affected. Diversification could help mitigate this risk.
5. **Manual Tax Lot Review**:
- Reviewing tax lots manually three times a week is time-intensive. While this demonstrates diligence, consider automating parts of your tracking with tools like spreadsheets or apps that integrate with Robinhood.
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**Final Thoughts**
Your strategy is commendable for its discipline, scalability, and focus on long-term growth. It reflects a thoughtful and methodical approach to investing, which is essential for success. That said, there’s always room to refine and adapt. By addressing areas like diversification and tax efficiency, you can further enhance the robustness of your plan.
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