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Monday, August 23, 2010

Monday Challenge Project Summary: August 23, 2010

Previous $500 Challenge Project Balances:

"The Three Sisters":

Investing "Sister" Balance: $852.37
Trading "Sister" Balance: $2,019.63
Side-pocket Savings "Sister" Balance: $475.30

Total Challenge Project Funds: $3,347.30


Introduction:
The original video explanation of the Challenge Project that began with $500, is to be found here. The Challenge Project is basically a demonstration of a model that anyone could at least follow along with on a weekly basis. It is my attempt without cost, to help out the 'little guy' when it comes to investing and trading by providing an example, a 'model' as it were ... as run by myself as a professional trader with real money, in accounts that I own; following my own three sisters portfolio management system; albeit modified a bit to operate with low funds. From time to time, I provide snapshots of the broker statements.

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. We split up Rule No. 2, into weekly segments; or $25.00 a week. As I mentioned on August 10th, I am in the processing of liquidating my own personal accounts, and will soon be trading this 'Challenge Project', full time.

For this week, the $25.00 weekly deposit is being transferred to the Challenge Project SAVINGS SIDE-POCKET Account.

As I have mentioned before, the Challenge Project is approaching a stage where I feel the 'foundation' is almost complete.

But something that will be needed for some time, is to apply rule no. two towards the savings 'sidepocket sister' account. Why?

Remember, I never approach the markets with the mindset, asking the question of "How much money can I possibly make?" I approach the markets with the mindset of controlling my risk. And part of controlling my risk, is making sure that I always have plenty of 'dry tinder' as it were, in the form of 'tier' capital. One of the means that I make sure that I have plenty of capital, is through having a "savings side-pocket" fund. Or as I sometimes refer to it, as my 'savings sister' account, from my 'three sisters' portfolio management system.

And at the moment, the Challenge Project 'savings sister' account doesn't have 'plenty' of 'dry tinder'. It has some. A bit. With this weeks deposit, if we saw a large downturn in the equities market, I could transfer $125.00 towards the investing account, and have that capital replenished in my side-pocket account within 5 weeks time. But I want more.

So for this week, we'll apply rule no. two towards the side-pocket account.

Here are the new balances for each of the Challenge Project accounts ...

Challenge Project Balances After Rule No. 2 Deposit:

Investing Account Balance: $852.72
(YTD the account is +6.706% YTD Return is about +2.235% Continuing Yield is approximately +6.96% in cash dividends and additional shares of stock)
  • 6.2367 shares of KO (DRIP is on for 4.2367 shares)
  • 5.13 shares of JNJ (DRIP is on for 3.13 shares)
  • Cash: $206.49
-$4.00 of this cash I reserve to D.C.A. KO
-$14.00 of this cash I reserve to D.C.A. JNJ
-This leaves $188.49 cash available
  • Additional $125.00 available from slush fund
Investing Account Balance Since Inception
(Can be Enlarged):


Stock / Futures Trading Balance: $2,019.63
( YTD cash contributions, equity and return up about 26.53 % )
  • 2% risk tolerance gives us $40.39 'at risk' levels
  • 3% risk tolerance gives us $60.58 'at risk' levels
  • Additional $125.00 available from drawdown / slush fund
Trading Account Balance Since Inception:
(Can Be Enlarged)

Savings Side-Pocket Balance: $500.30
(YTD cash equity up about 149.8 % Return on Capital is 0 %)
  • $125.00 for a Slush fund / Drawdown Kill Switch fund
  • $250.30 for a Base Savings
  • $125.00 for Emergency Savings
Savings Side-Pocket Account Balance Since Inception:
(Can Be Enlarged)


Total $500 Challenge Project Balance: $3,372.65

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


We'll be discussing the Challenge Project again soon enough ...

* * *

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 14 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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