Do You Have A Fun Money Account?

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I tend to swing constantly between being really interested in trading individual stocks and then not looking at a quote for weeks. To make things worse, I live in the Pacific time zone and the markets close at 1pm here. I am not a morning person, which leaves me with about two hours to trade each day! :/

I’ve always liked the idea of keeping the majority of my retirement savings in index funds, but having a separate money account to try and “beat the market”, as everyone says. Maybe either give it $50 a month, or cap it at 5% of my net worth? I’ve read several investing books that mention this as a way to manage the urge to actively trade, but does anyone out there actually have one of these accounts? If so, do you recommend it?

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  1. I do 😉 I don’t have a set percentage of money in there, though. I just threw a couple grand in there and I buy things I think will make money.

    Best I’ve done so far is a 95% return on one of my purchases. But since it’s just a play account, I don’t get crazy ideas of thinking I should put all my savings in there.

    I think it’s a good idea to have something like this if you sometimes get the itch to try and beat the market.

  2. My fun money account is my Roth. 🙂

  3. My fun money is the type where I forget to mail in a rebate form from a purchase, or lose something valuable, get something stolen, get a traffic citation, forget to pay a bill and get a late fee, etc. and then I can comfort myself by thinking, hey, at least I didn’t blow the money on gambling on stocks!! … hehe. FUN!

  4. I love this idea. I’m actually still in trading mode and trade stocks in our IRA accounts and I have even borrowed money on a 0% credit card to trade stocks for fun. However, borrowing money to trade really test my nerves and I cannot wait for the day, when it is just money I have saved up to have “fun” with. I’m currently putting away about $25 a month to build up a fun fund, but it will be a couple years before it gets to the point where I can actively trade with it.

  5. A Roth IRA can work for this…but set yourself limits. Great way to lose both money and time!

  6. Hmm… making my Roth a fun money account… No capital gains taxes or losses to worry about, that sounds good.

  7. active trading AND making profit in a DOWN market is harder than killing one bird with two stones…

  8. active trading AND making profit in a DOWN market is harder than killing one bird with two stones…

  9. After years of having a fun money account where I had more strikeouts than homeruns as I “went for the fence”, I decided to go the boring route and start DRIP investing. At the end of 2002, I closed my Scottrade account, opened a DRIP with NovaStar, and haven’t looked back. I throw $100 per month into the account, and it’s consistently kicked back dividends of 20-25% which go towards buying more shares.

  10. Nimbette2 says

    I have a Mad Money account with Etrade. I use it to buy penny stocks & so far it has made me 250% since I opened it 6 months ago.

    I only invested $1,000

    It’s fun, but I realize the old saying “easy come, easy go” could hold true.

  11. I dont officially have ONE account that is fun money. I do this with part of my Roth and part of my brokerage soon to be only in Roth. As you mentioned, I dont have “fun” with more than 5% of my networth. I would definitely recommend having such an account. If anything, it will give you a feel of what your nerves are like in a volatile market like what we are having right now and what kind of investor you are (like to invest in index/mutuals and forget about it OR an aggressive risk taker). Try it out but not with too much!

  12. I have a fun money account.
    Historically, I’ve made fairly conservative investments that have done well for me. When I tried to have some real fun and embrace more risk with a specific equity (SNDA) I was bitten hard.
    I’ve now worked out an exit plan and a revised fun money investment strategy (which includes more diversification).

    I have a few strong thoughts here:

    1. don’t use retirement accounts for fun money investing – if you lose the money, you’ve lost the tax advantage and can’t replace it (assuming you max your contribution each year). The deferred taxes are too precious to lose compared to delaying capital gains on a small % of your investments.
    2. cap the investment at 5% of your investible assets – not total assets – exclude real estate.
    3. make sure it’s money you’re not counting on for retirement or other expenses.
    4. even if the amount is small, find some diversification.

    I have a more detailed discussion at my blog at this posting on my fun money.


  13. Noman123 says

    I use a Scottrade account which I funded out of a unexpected bonus at 3200 with a goal to try and work it to 10000 in two years. Sometimes its shorting large caps; sometimes its pennystocks; I use a couple of stock screeners from Marketwatch and PC quote to look for likely stocks. Its also fun to try and time industry lifts (or drops) if you track the major tradeshows…particular the buzz industries like consumer electronics or nanotech.

    Keeps me from monkeying or “tweaking” the retirement accounts and provides some amusement.

  14. My fun money is somewhere around 3% of my net worth. A taste of stuff that peaked my curiosity but goes against the investing philosophy all the indexing gurus have sold me on.

    * 100,000 shares of a penny stock
    * similar $ amount of an environmentally friendly ETF
    * similar $ amount of a mining stock, since I couldn’t afford to get into Vanguard’s precious metals fund
    * about 50 unsecured loans on

    So far, my fun money has performed a little bit better than my long-term portfolio, but mostly because of the penny-stock. 🙂

  15. Our fun money accounts are our IRAs. Our current 401ks and our rolled over 401ks are the vast majority of our retirement money. I play with one IRA account in each of our names. I feel better that it is a retirement account because it is money we do not need for 20+ years. I started with $24,000 in early 2004. A few months ago the accounts were worth $37,000. Today it is around $30,000. I took a few too many risks in April. I have learned and will continue to experiment.

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