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Wednesday, September 10, 2008

How to Screw Up an Investing Account

Quotations of the Day:

"The most powerful force in the universe is compound interest" - Albert Einstein

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Challenge Accounts:

Investing Account Balance: $423.23
Stock / Futures Trading Balance: $954.13
Online Savings Balance: $47.51

Personal Trading Thoughts: Holy smokes. What chop !! We sunk 200 and some points yesterday, from the previous days gains of 200 and some points. This volatility is absolutely and positively nuts! I'm not trading this stuff, even on a day trade.

Personal Investing Thoughts: We remain in the channel that we've been stuck in for a month. Just waiting for a breakout. I wonder if the market will remain this way until the election. DRIP remains on for every dividend investment stock I continue to hold.

First of all, remember this. I often tell folks there is a severe difference between investing and trading. And this difference includes much more than just your time frame. It involves how the wealth is accumulated.

Now most of what I have discussed, is how to screw up when it comes to trading. How to apply money management principles when it comes to trading.

But how do you screw up when it comes to investing? I discuss the ways to screw up an investing account in the following video:

1) Ignore Blue Chip Stocks
2) Ignore Dividends
3) Ignore DRIP
4) Ignore Proper Diversification.

I discuss those four 'no-no's' in more depth in the following video ... (video included)

It's not hard. Investing is much easier than trading. But you must adhere to those four principles to be a successful dividend investor.

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Challenge Project Account Balances and
Money Management Numbers:

Investing Account Balance:
Stock / Futures Trading Balance: $954.13
Online Savings Balance: $47.51

Total Trades: 6
Largest Inter-trade Drawdown: $86.51
Consecutive Losing Trades (Drawdown): 2
Average Drawdown: $56.63
Average Loss: $74.27
Accuracy Rate: 33%
Average Reward: $175.34
Risk : Reward Ratio: 1 : 2.1
Trading Money Gain / (Loss): Up + $53.84

This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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