If you've been following my investing pages at all, you know I'm a fan of index funds, mostly in ETFs. I try to stick to an allocation strategy and make my buy and sell decisions based on whether my allocations are 'on target' or not.

For example, if my target allocation for gold (GLD) is 4% of my portfolio, then if I am holding 5% of my portfolio in gold I sell 20% of it to get back down to 4% total. Or if I'm only holding 3% in gold, I'll buy in to get up to 4%. This is a methodical way to 'buy low and sell high', and it gives me a non-emotional touchstone to fall back on when the market is in chaos.

That's all well and good, but it's a little dull. After I've spent a good deal of effort learning about the market, it seems like I should be doing a little educated speculation - be a little more engaged. My solution: leave 98% of the portfolio on semi-autopilot in diversified index funds. Speculate (play around, gamble, whatever) with the other 2%.

My track record in individual stocks is less than stellar. I bought WAMU at $20 figuring it was just 'unfairly beaten down'. You know how that one came out. I've made a few bucks here and there, but in the aggregate I am a bit below 'breaking even'.

One of my 'losers' was Generex Biotechnology (GNBT). I made some money swing trading GNBT, but ended up holding onto some shares that were just circling the drain for about four years. (I have a bad habit of hanging on to losers.)

One day in 2010 I got a cold call from 'Bob', a genuine New York Broker (NYB). He was working from a list of current GNBT shareholders, trying to generate some interest in buying more GNBT. It was the first time I ever bothered to interact with an NYB. What do I mean by NYB? First and most obvious, he has that NY accent and 'mile-a-minute' patter. It immediately conjures up an image of someone who is constantly making deals and living a stress-filled life. I think I had a soft spot for Bob because he reminded me (the accent) of my old college lab partner, who hailed from Long Island. The second attribute of a NYB that was new to me was the 'hot tips'. Bob is plugged into a research network that is supposed to help him predict the trends and lean the right way. As I listened to him, it sounded an awful lot like 'insider trading' to me - when I voiced this, I got a very righteous assurance that he was not going to risk his license by engaging in anything like that. The final attribute of the NYB that was new to me is the hefty commission / trading cost. Three percent (coming and going) is not unusual; five percent seems to be the cap. 'Pay to play' and all that.

Bob's first mission was to determine if I was a 'qualified investor' or not. With two professional incomes (Sharon is a CPA) and twenty+ years of diligent investing, we just made the cut. This is a hurdle the regulators (not certain if it's industry 'self-regulation' or governmental) throw in to ensure that modest income folks aren't betting all of their paycheck on a complicated investment vehicle they don't understand. Of course, just because I'm 'qualified' doesn't mean I necessarily understand them either...

On to part 2