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Friday, January 30, 2009

The Low Funded Challenge Account Project: February 2009 (And Broker Statements)

January's Challenge Account Balances:

Investing Account Balance: $400.00 (Average)
Stock / Futures Trading Balance: $1,014.62
Online Savings Balance: $122.97

The original video explanation of the Challenge Project is to be found here.

A video summary of my decisions for this month is to be found at the end of this blog entry.

Back in October of 2007, I created sub-accounts from my main brokerages; as a main feature to this blog, and in November of 2007, I began the Challenge Project. Their purpose, as well as the purpose of many of the articles in this blog, is to assist the low-funded trader understand what principles he needs to consider when trying to get started in the markets, or if starting up again because his or her account account has been wiped out. These are actual sub-accounts at my brokerages that I own, and I will look to for growth. I will announce actual trades and investments that I perform in them, and the money management rationals and reasons for my decisions as a means to educate others. I wish to demonstrate that as long as one enters this business with the proper principles, strategy, education and emotional discipline in hand, you can 'make it' in this business.

In the beginning of this experiment, I placed $130.00 with Sharebuilder as a long-term investment account, and I placed $370.00 in the account for trading Futures options. I later added a small ING Savings account that has been built up to a balance of $123.25. Due to the initial investment, I once termed this the "$500 Challenge". Since we now have much more in these accounts than $500 at the end of January, I will term this the "Low-Funded Challenge Project" instead of the "$500 Challenge". At times I will refer to them simply as the "Challenge Project" accounts.

I also had three rules for the "Challenge Project" accounts. At the beginning of each month, I review and consider where we stand, and how those three rules impact the current months decisions. So let's do that for February of 2008.

Rules for the Challenge Account:

1) The initial investment is $500.00, to be split amongst the accounts. After creating the accounts in October of 2007, we had our initial deposited transferred in November of 2007. $130 went to Sharebuilder for longer term investments, and $370 went to the Xpresstrade brokerage for futures options purchases. Xpresstrade was later bought out by "optionsXpress", therefore this is now the optionsXpress account. This account is the 'trading' account, for stocks, ETF's, and futures options. Therefore, rule #1 is always complete.

2) Each month, I can contribute $100.00, that can be split amongst the accounts however I choose. In other words, I can send $30.00 to Sharebuilder, $70.00 to optionsXpress; or $100.00 to optionsXpress, and nothing to Sharebuilder, etc. Last month we deposited $60.00 to the Investing Account, $40.00 to the Trading account, and nothing to the Savings account.

For February 2009's deposits, I decided to send $10.00 to the Investment Account, $60.00 to the Trading Account and $30.00 to the Savings Account.

Since we were properly positioned in the Investment Account to take on another DRIP dividend stock last month? We did this by buying some shares of JNJ, and making sure the DRIP plan for the stock was on. We had no trades last month, and a small amount of interest in the savings account.

I'm probably not going to be engaging in any trades for the Challenge project in February, as 1) The Account Balance is still very, very low, and therefore 2) the primary job is to get the account equity bumped up.

That works out well. Why?

Well, look again to the growth strategy we've had all along. If you note my project strategy video (located here), for a long time, we were looking to get past the first step in this phase of the project. Thus, we were looking for the trading account to have an equity greater than $900.00. We've accomplished this, as we now have a balance of $1,014.62 at the end of January. The next goal is to get the account past $1,100.00. After Februarys Deposit clears, we'll be very close to doing this. But what have I said all along?

That the goal right is not to actively trade that account. It's to get the account equity balance bumped up. I want to say that again. The goal right now, isn't to primarily trade that account. It's to get the account equity balance bumped up. So this works out well.

3) I'll be using regular investment and trade vehicles. Bonds. Stocks. ETF's. Futures Options. I want to wait and bump up the equity, so I probably (probably) will not trade anything in the Challenge Trading account in February.

We're cruising right along ...

(Video Included. If you're seeing this entry elsewhere and cannot play the video? Click this link to go to the exact blogged vlog entry ...)

February Balances after Deposit from Rule #2

Investing Account Balance: $410.00 (This will fluctuate with the BAC, JNJ and KO stock)
Stock / Futures Trading Balance: $1,074.62
Online Savings Balance: $153.25 (Before Interest Payment)

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Note: 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 13 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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