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Monday, January 24, 2011

Monday Challenge Project Summary: January 24, 2011

Previous $500 Challenge Project Balances:

"The Three Sisters":

Investing "Sister" Balance: $1,032.66
Trading "Sister" Balance: $2,244.36
Side-pocket Savings "Sister" Balance: $650.00

Total Challenge Project Funds:
$3,927.02

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 have liquidated all of the other personal accounts that I've discussed on this blog for the last 4 years, and to emphasize the strength of these principles? I will demonstrating my success, again, this time it will be live, with the 'Challenge Project', full time.

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

Savings Side-Pocket Drawdown Account:
As I mentioned a few weeks ago, my goal was to get the cash that is held at the brokerage account, for the 'savings side-pocket sister' account up to $675.00. We have now reached that level.

So, from this time forward, all funds transferred to the savings side-pocket / drawdown sister' account will be sent to the banking institution to earn interest; although the 'sister' itself will still be treated as one account, not two ... as the dividend investing 'sister' account is currently.

I will do this at least until this entire savings drawdown 'sister' account reads $2,750.00

Dividend Investing Account:
Ok, so I went ahead and added General Mills (GIS) to the dividend investing 'sister' account. As you can see from the balances below, this depletes all of the cash that was reserved for a new purchase (and then some). That category is showing a slightly negative balance, but that's not something that one application of rule no. two can't fix, so there's no cause for concern there.

Obviously, we'll be applying rule no. two towards the dividend investing 'sister' account in the near future. To work towards the goals we've been discussing lately (namely, building up our 'maneuvering capital') when an application of rule no. two is made towards the dividend investing 'sister' in the future, approximately 85% of said deposits will be applied to that category of 'maneuvering capital'. The remainder will be split towards the other categories.

This is all in an effort to a) attain the goals outlined in the "Challenge Project Strategy Outline" entry and b) attain those goals in a manner where we can still take advantage of opportunities in the market, control risk as well as allow for future growth.

Trading Sister:
As I mentioned in last weeks "Airelon's Challenge Chronicles", I have to review how I am going to approach the concept of "Opus I" (currently running), "Opus II" and "Opus III" in regards to "Airelon's Challenge Chronicles". Because although we are not looking at trading this account currently, I do plan on focusing on the trading 'sister' account towards the end of this year so that it can come to be in a position where it will be the primary 'thrust' of the Challenge Project ...

It's all a chess game ...


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

Challenge Project Balances After Rule No. 2 Deposit:

Goals for Each Account By the Time I Trade Challenge Project Full Time
  • Investing Account: $580.00 in cash past equity positions
  • Trading Account: $2,600.00
  • Savings Side-Pocket Account: $900.00
Investing Account Balance: $1,026.26
(YTD the account is +0.5792% YTD Return is about -1.826% )
  • 6.2685 shares of KO (DRIP is on for 4.2685 shares - Yield is +2.802% )
  • 5.1856 shares of JNJ (DRIP is on for 3.1856 shares - Yield is +3.367% )
  • 6 shares of GIS (DRIP is not on for any shares - Yield is +2.975% )
  • Cash: $87.37
-$58.41 of this cash I reserve for 'maneuvering' capital ( 5.692 %)
-$ 5.00 of this cash I reserve to D.C.A. KO ( 0.4872 % )

-$26.00 of this cash I reserve to D.C.A. JNJ ( 2.533 % )
-$ 0.00 of this cash I reserve to D.C.A. GIS ( 0 % )

-This leaves -$ 3.04 cash available for a new purchase ( -0.2962 % )
-This leaves $ 1.00 cash available for a second new purchase ( 0.9744 % )
  • Additional $168.75 ( 16.44%) available from slush fund, up to $1,195.01

Trading "Sister" Account: $2,244.36
( YTD cash equity up 1.126 % Return on Capital is 0 % )
  • 2% risk tolerance gives us $44.88 'at risk' levels
  • 3% risk tolerance gives us $67.33 'at risk' levels
  • Additional $168.75 available from draw-down / slush fund, to $2,413.11

Savings Side-Pocket Balance: $675.00
(YTD cash equity up about 8 % Return on Capital is 0 %)
  • $168.75 for a Slush fund / Draw-down Kill Switch fund
  • $337.50 for a Base Savings
  • $168.75 for Emergency Savings

Total $500 Challenge Project Balance: $3,945.62 (YTD cash equity up about 2.094 % Return on Capital is -0.4815 % )

* * *

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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