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Wind
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Member since Nov 2016
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Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
I am very new to investing so I'll share my personal experience.

Last year I opened and contributed to my ROTH IRA.

I went with Charles Schwab for my platform.

I invested the contribution into SWPPX.

Great returns this year, almost no fees (.003% maintenance, no cost to buy/load/sell) and paid a nice dividend in December.

As I continued to learn more this year, I wanted to put in place an order called a "Trailing Stop Loss"

Investopedia - Trailing Stop

That is when I learned some of the drawbacks of mutual funds, as you can't place trailing stop or stop losses on these types of investments.

I am currently considering switching to an ETF for 2018 so I can put a trailing stop loss in place, but haven't sat down to look at how much more I would have paid in fees for the "peace of mind" from the trailing stop loss.

Opinions from the Money Board? Should I keep my SWPPX Mutual Fund? Switch to something like SPY and put a trailing stop-loss in place?

I am:
Under 30
No Debt
~$17000 in a ROTH IRA
I put about $1200 a month in savings after my expenses.
I do not own a home / have a mortgage.



This post was edited on 1/3 at 10:38 am


Janky
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Team Primo
Member since Jun 2011
22120 posts
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re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
Leave it and forget you have it. Trading the S&P is a losing game.
This post was edited on 1/3 at 10:45 am


Wind
LSU Fan
Member since Nov 2016
770 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
quote:

Leave it and forget you have it. Trading the S&P is a losing game.


What would be your suggestion instead?

I want to keep my money in the market and think we'll have another okay/good year, but want to protect myself from the inevitable correction and have the cash to go back in after the correction.


Any opinion on the effectiveness / value of a Trailing Stop loss? If the market sees a significant single-day drop, does the sale trigger quickly enough to avoid eating the entire correction?

This post was edited on 1/3 at 10:51 am


Janky
LSU Fan
Team Primo
Member since Jun 2011
22120 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
My suggestion would be to leave it alone and forget you have it.

There are many issues with stops and stop losses. Gap downs can kill you. Also, an index will not move enough in a single day to warrant any downside protection.

Stops may have some value on individual stocks, but I have seen people get whipsawed more times than not.


Wind
LSU Fan
Member since Nov 2016
770 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
quote:

My suggestion would be to leave it alone and forget you have it.


Maybe I'm being dense here

What would you do with the contributions in subsequent years?

I'm about to make my contributions for 2017 and 2018.

Would you leave them as un-invested cash or put the remaining cash into the same mutual fund, ignoring a switch to ETF / putting a trailing stop loss in place?

This post was edited on 1/3 at 11:09 am


Janky
LSU Fan
Team Primo
Member since Jun 2011
22120 posts
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re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
You can put it in the MM and dollar cost average in if you are concerned about a pull back. Also, your balance is getting close to allocate out if you would like to.


Wind
LSU Fan
Member since Nov 2016
770 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
quote:

You can put it in the MM and dollar cost average in if you are concerned about a pull back


Understand what you mean here, put it in slowly month by month and don't put in the full contributions at one time.

quote:

your balance is getting close to allocate out if you would like to.


Showing my ignorance again here. I did try to search for what you meant by this but couldn't understand it.

Are you saying sell some of my positions and keep it in the MM?

Can you explain what you meant by this in a little more detail?


Janky
LSU Fan
Team Primo
Member since Jun 2011
22120 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
Yes. Invest the same $ amount (not shares) over a period of time.

What I mean is sell the s&p fund and buy several other funds that represent other asset classes. This can be done with indexes as well.


Wind
LSU Fan
Member since Nov 2016
770 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
quote:

What I mean is sell the s&p fund and buy several other funds that represent other asset classes. This can be done with indexes as well.


Understand the benefits of this, the obvious being the diversification.

Why does the balance of the account impact that decision?


Janky
LSU Fan
Team Primo
Member since Jun 2011
22120 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
Different reasons like fund minimums, over diversification and others.


Wind
LSU Fan
Member since Nov 2016
770 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
Thanks for taking the time to respond and answer all my questions.

Gave me a lot to think about.



Janky
LSU Fan
Team Primo
Member since Jun 2011
22120 posts
 Online 

re: Mutual Fund vs ETF (SWPPX vs SPY) [Trailing Stop]
Good luck.


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