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Wednesday, January 21, 2009

Whiteboard: Strategy Shift

"Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat." - Sun Tzu, The Art of War

Well, I'm looking over balances at my accounts. And it's time to make a decision moving forward for 2009. Not simply to maintain what I have, but in the current economic environment to become profitable. Profitability is efficiency.

Here's a look at a portion of my dry erase whiteboard:


So what does that mean? Number one goal? Build cash. Build savings. Any profits from my business ventures? Go to cash reserves.

Following that goal, I am going to be watching the balance sheets at the companies where I have my money, very closely. Namely, ING, optionsXpress and I still have a small portion at Scottrade.

Following the goal of building cash? I'm going to really focus on trading. I've already started doing that in 2008, because my investment portfolio only represents, at the time of this writing - at 17.67% of my total holdings. But I want to distance myself even further from my investment holdings. How do I do that? Build cash. Shrink the percentage of my investment holdings, by building cash. One way to build cash, is to focus even greater efforts on trading.

Following this? I had a decision to make regarding my DRIP stocks for my investment portfolio. This one was a tough decision to make. Do I accumulate more shares, in essence for free, in the companies on the stock market right now through the DRIP programs? At very attractive prices? Or do I build cash by receiving the cash dividends?

I decided to do both. Some brokerages will allow you to engage in partial DRIP. In other words, if you have 100 shares? Use 50 shares to pay you cash dividends, and 50 shares to engage in DRIP; dividend reinvesting for more shares. Unfortunately, those stocks that I hold at Sharebuilder will not allow for partial DRIP. It's all or nothing. So at my Sharebuilder accounts, I will be turning off the DRIP on those stocks that are maintaining their value. For those stocks that lose value, I will turn the DRIP on.

That's the plan moving forward.

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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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