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Tuesday, May 31, 2011

Challenge Project Summary: May 31, 2011

Previous $500 Challenge Project Balances:

"The Three Sisters":

Investing "Sister" Balance: $1,254.16
Trading "Sister" Balance: $2,369.36
Side-pocket Savings "Sister" Balance: $800.08
Total Challenge Project Funds: $4,423.60

The original video explanation of the Challenge Project that began with $500, is to be found here. If you would like to hear the "why" behind the challenge project, you can find that here as well as 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, 2010 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, there is no application of Rule No. 2; as that has been exhausted for the month of May, 2011. The next application of Rule No. 2 will be on the first Monday of June, 2011.

So tomorrow is June 1, 2011. We're about halfway done with the year, so I thought it was a good time to review what we've accomplished thusfar for the year.

Maneuvering capital. We've added $500.00 of maneuvering capital between the three 'sister' accounts'. I cannot stress that enough. Before any trade is made. Before any investment is purchased. Good grief, before any interest is earned, you have to have maneuvering capital. That means that there will be plenty of money left over after you make the trade. After you purchase the investment. This allows for maneuverability for future purchases and trades, as well as lessens any psychological impact from any drawdown that has to be endured.

Closely associated with the above concept of maneuvering capital, is that two of the three 'sister' accounts are preparing to be used on a more active basis. The trading account will soon be approaching a position in order to trade somewhat more actively, and the savings side-pocket account will soon be able to set up CD yields on ladders, as well as build toward input cost hedging.

Dividend yield. We have earned yield from both Coca-Cola (KO) and Johnson & Johnson (JNJ) both in terms of DRIP accumulation of more shares, as well as cash; these positions being setup in two different accounts so as to take advantage of both DRIP and cash yield. As well, we have a new position with General Mills (GIS) that is earning us, for the moment, straight cash.

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: This Entry describes the next goal. Account is 'active'
  • Trading Account: $2,600.00
  • Savings Side-Pocket Account: This Entry describes the next goal. Account is 'active'

Investing Account Balance: $1,245.90
(YTD the account is +22.11 % YTD Return is about +4.229 % )
  • 6.3283 shares of KO ( DRIP is on for 4.3283 shares - Yield is +2.8266 % )
  • 5.2147 shares of JNJ ( DRIP is on for 3.2147 shares - Yield is +3.4147 % )
  • 6 shares of GIS ( DRIP is not on for any shares - Yield is +2.8506 % )
  • Cash $241.07 ( 19.35 % )
-$150.37 of this cash I reserve for 'maneuvering' capital ( 12.07 % )
-$ 17.94 of this cash I reserve to D.C.A. KO ( 1.44 % )
-$ 42.08 of this cash I reserve to D.C.A. JNJ ( 3.377 % )
-$ 20.68 of this cash I reserve to D.C.A. GIS ( 1.66 % )
-This leaves $ 5.00 cash available for a new purchase ( 0.4013 % )
-This leaves $ 5.00 cash available for a second new purchase ( 0.4013 % )
  • Additional $200.00 ( 16.05 % ) available from slush fund, up to $1,445.90
Investing Account Balance Year to Date
(Can be Enlarged)

Trading "Sister" Account: $2,369.36
( YTD cash equity up 6.759 % Return on Capital is 0 % )
  • 2% risk tolerance gives us $47.38 'at risk' levels
  • 3% risk tolerance gives us $71.08 'at risk' levels
  • Additional $200.00 available from draw-down / slush fund, to $2,569.36
Trading Account Balance Year to Date
(Can Be Enlarged)

Savings Side-Pocket Balance: $800.08
(YTD cash equity up about 28.01 % Return on Capital is 0.01 % )
  • $200.00 for a Slush fund / Draw-down Kill Switch fund
  • $400.08 for a Base Savings
-$322.08 of this cash I reserve for 'burn rate / maneuvering' capital ( 80.5 %)
-$ 56.00 of this cash I reserve for CD Ladder creation ( 14 % )
-$ 9.00 of this cash I reserve for the first side-pocket purchase ( 2.25 % )
-$ 9.00 of this cash I reserve for the second side-pocket
purchase ( 2.25 % )
-$ 4.00 of this cash I reserve for the hedging account ( 0.9998 %)
  • $200.00 for Emergency Saving
Savings Account Balance Year to Date
(Can Be Enlarged)

- As described in previous entries, all deposits past $675.00 will be towards an interest bearing account, although it separate accounts will still be treated as one 'sister' portion of the book

Total $500 Challenge Project Balance: $4,415.34 ( YTD the account is +14.25 % YTD Return is about +1.16 % )

* * *

Note: The above statements should not be construed as an investment or trading recommendation. Airelon's Investing and Trading Journal is a blog that allows subscribers to look 'over my shoulder' as it were, for my own personal specific trading and investing ideas and thoughts for the next week. But they are only thoughts as of the moment of publication, and are subject to change.. Any trades or investments that I discuss within this blog are simply my own thoughts regarding my own investing and trading outlook. Remember that entering any market is an individual decision. There is no guarantee that I will enter, or have entered any of the trading or investing ideas that I discuss in this blog; as larger accounts may require a different strategy as the ones presented here. This blog simply contains my trading and investing thoughts for the next week. I, the author do not grant this work for wide distribution beyond any single individual subscriber as this publication is protected by U.S. And International Copyright laws. All rights reserved. No license is granted to the user except for the user's personal use. No part of this publication or its contents may be copied, downloaded, stored in a retrieval system, further transmitted or otherwise reproduced, stored, disseminated, transferred, or used, in any form or by any means except as permitted under the original subscription agreement or with prior written permission. I personally only enter any market after watching and reading the tape and I trade using money management principles. The losses in trading can be very real, and depending on the investment vehicle and market, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. I do have 15 years of experience in trading and investing in these markets. Airelon's Challenge Chronicles are demo accounts,with all of the inherent problems therein, which are used within this blog in an attempt to track the results of my own thought processes., and is run as a model. Traders who should make their own decisions based off their own research, due diligence, and tolerance for risk. Any pictures used within this blog are believed to be public domain. Any charts that displayed using the ThinkorSwim platform, or any other charting software are believed to be public domain. Any other pictures were obtained through Wikipedia's public domain policy. As a reminder, any trades discussed for "Airelon's Challenge Chronicles" would only be 'day trades' according to the parameters discussed for Airelon's Challenge Chronicles, at this stage of the game in order to escape the risk of over-leveraged gap opens in the commodity futures markets. As a 'trading sister' would have grown to the $30,000 level, I would have graduated the account into 'swing trading'. In addition, it is understood that readers have read my YouTube methodology series. It is also understood that the writer of this blog has repeatedly warned against the dangers of shadowing any other traders thoughts. 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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