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Monday, October 12, 2009

Monday Challenge Project Summary: October 12, 2009

Previous Week Challenge Project Balances:

Investing Account Balance: $619.36
Stock / Futures Trading Balance: $1,521.21
Online Savings Balance: $150.30

The original video explanation is to be found here.

Rule No. 2 of the Challenge Project states that each month, we can divvy up $100.00 as we wish between the various challenge project accounts. Some time ago I stated that I may split up Rule No. 2, into weekly segments; or, $25.00 a week.

For this week, the $25.00 weekly deposit is being transferred to the Investing Account.

Now by this point, we have beefed up the Challenge Project Investing available cash by a great deal. But there is more work to do here. Here is a pie chart of the Investing Accounts holdings as of this most recent deposit:

Our cash in the Investing Account of the Challenge Project now represents a little over one third of the total holdings. As I have made note every week? I wish to reserve about $120.00 of this cash to better Dollar Cost Average (D.C.A.) either my KO or my JNJ holdings should the ability and opportunity to do so presents itself.

Therefore, if I wanted to purchase a new dividend D.R.I.P. stock? I would only have $119.12 for that purchase, and nothing left over in reserve if the opportunity arose to better D.C.A. that position. With only $119.12 available, I cannot properly weight and match the new purchase, to the stocks that I already own.

Even if this was not the case, and I wanted to use the total $239.12 cash in the account for a new purchase? I would still wish to have cash in reserve, after said purchase. We also have to look to possible market conditions in the future. What if we were to experience a long overdue pullback in the equity markets? We'd want excess cash to take advantage of such a situation. As the Investing Account begins to grow, excess cash at all times becomes more and more critical. This is why I say that for the Challenge Projects Investing Account? We still have more 'work' to do, when it comes to bumping up the cash levels of the account.

Now, I also need to say that I haven't forgotten about cash for the Trading Account and the Savings Account. In future weeks, we'll be using Rule No. 2 to add a bit to both of those accounts as well.

Here are the new balances for each of the Challenge Project, after this weeks deposit ...

Challenge Project Balances After Rule No. 2 Deposit:

Investing Account Balance: $653.84
(YTD cash and equity up about 35% Return is about 0.5%)
  • 4.1377 shares of KO (DRIP on)
  • 3.0546 shares of JNJ (DRIP on)
  • Cash: $239.12
-$60.00 of this I reserve to D.C.A. KO
-$60.00 of this I reserve to D.C.A. JNJ
-This leaves $119.12 for cash for new purchases
  • Additional $37.53 available from slush fund
Investing Account Balance Since Inception
(Can be Enlarged):

Stock / Futures Trading Balance: $1,521.21

(YTD cash equity up about 50%. Return on Capital is about 2%)
  • Additional $37.53 available from slush fund
Trading Account Balance Since Inception:
(Can Be Enlarged)
Savings Balance: $150.30
(YTD cash equity up about 22.3%. Return on Capital is about 1.49%)
  • $37.53 for a Slush fund / Drawdown Kill Switch fund
  • $75.24 for a Base Savings
  • $37.53 for Emergency Savings
Savings Account Balance Since Inception:
(Can Be Enlarged)

Total Challenge Project Growth Since Inception:
(Can Be Enlarged)

We'll be back to the Challenge Project, next Monday.

* * *

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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