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Friday, October 31, 2008

Retirement Account, Financials EFT (XLF), Fidelity Select Banking

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We thought to share the result of one trade we have made in our retirement account. As you may recall, last Friday (October 24, 2008), we wrote that the market was again offering an excellent entry point for long term, long positions in retirement accounts.

Last Friday we decided to take a long position by buying shares in the Fidelity Select Banking fund. The entry was at 15.82.

The price of that fund (FSRBX if you want to check it) is at 17.98 (as of close of october 31, 2008).

We just closed the position for a profit of close to 14%.

Since they charge short term trading fees of 0.75%, our net gain is 13%.

The money is now safe back in a cash fund. We will be looking to deploy it if and when an opportunity arises again. There is one little thing though. If we repeat this in and out one more time in a quarter, Fidelity will flag us as short term "disturbers of other investors" and disallow it to do it for 90 days. The fact is that they do not like people such as us making money very soon,as money would stay only for a short period of time in their funds, they will not collect fat management fees. Note that even if we pay them 0.75% they consider it not enough. They hate successfull timers! When we discussed it with them sometime ago (we used to play their index funds), they told us to just go away. We then moved, at the time, to their select funds. We used to play the select gold as we used to make out of it 3% here and there even day trading it as it is a very volatile fund. They later even closed that opportunity, and now they do not allow trading during the day in select funds. Select funds at Fidelity were a semi-ETF funds as they used to be trading on the hour. They removed that possibility about 2 years ago.

Now we have to enter and exit only at market closes. A lot harder than doing it during the day, as the top and bottom of a day may not always be at market close.

But we designed systems around this, which however would require the use of a brokerage account. It is another interesting element that leads top efficient use of retirement accounts and brokerage accounts to decrease taxes, improve entry and exit, obtain zero interest loans, (and keep fidelity silent).


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Happy trading,


Anonymous Anonymous said...

Frequent trading restrictions are the norm for these types of accounts. In my case I was banned from internet trading of my retirement account for one year because of this. They allow only two round-trips for any 45-day rolling period, and only using the closing price.

Not a day trader's dream!

However, my account is much more favorable than many because of my timed trades.

November 2, 2008 at 2:20 PM  

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