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Archive for August, 2009

Posted by MartZee August 29, 2009

Picks 08/24 – 08/28

New stock picks this week:

no new positions

Existing & new holdings:

Symbol Qty Last Gain($) Gain(%)
FUQI 3 26.27 -8.19 -9.41
STEC 3 39.90 15.33 14.69
V 7 70.50 43.75 9.73

Contribution this week: $0

Current capital exposure (total risk of the entire portfolio): -3.31%

New positions available to open: 0

Starting account value = $1,625.41

Account value = $1,655.06 (without margin)

Buying power = $963.05

[tag]Portfolio Gain/loss[/tag] this week = 1.82%

[tag]Portfolio[/tag] Gain/Loss for AUGUST 2009 = -2.44%

Portfolio Gain/loss for 2009 = -25.10%

[tag]Annual Return[/tag] (CAGR): -35.40%


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Posted by MartZee August 29, 2009

A money management in investing I.

In my post “How to create the best investment strategy” I wrote about how to start saving and investing money with small account, with small amount of money saved every month. I practice it myself in my accounts. I also advocate having two to three investing accounts with two to three different strategies and approaches to boost your investment results. I recommend having a very conservative account where you invest into selected mutual funds or index funds and you should apply a buy and hold strategy. Your another account should be more aggressive and well managed to improve your results. I do it this way myself. I have a 401k and ROTH IRA accounts, where my 401k is considered as the conservative one, ROTH IRA will be more aggressive account, but still I will be investing mostly into mutual funds and ETFs and the last account is the most aggressive investing account for trading stocks and options. In this post I will tell you about a money management you can theoretically apply on any of your investing accounts, but definitely it should be applied when trading stocks.

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The conservative accounts may provide you with returns anywhere between 5% to 20% annually, unless you get hit by recession or any similar disaster. If you are, however, adventurous and proactive and you do not want to take a passive approach when investing, you are probably looking for a strategy which can boost your results and double or triple your returns. So do I. Before I will tell you about a money management let me clear one thing: no matter what, never invest all your money in only one account or using one strategy. If you are looking for an aggressive strategy, you should use only part of your money in such a strategy, not everything. To remind you what I am talking about look at those people who lost all their money with Madoff.

I myself allocate my surplus savings this way:

Accumulation phase – emergency account & debt management

  • 3% of my salary goes to my 401k and 3% I receive from my employer.
  • 17% of my salary goes to my debt, which shall be paid of in about two months from now (ca. the beginning of October 2009).
  • 8% of my salary goes to my emergency account (should be fully funded by the end of 2009).

Accumulation phase – investing

After my debt is off i change my savings the following way:

  • 3% of my salary goes to my 401k and 3% I receive from my employer.
  • 17% of my salary will go to my ROTH IRA and be invested as I described in “How to create the best investment strategy
  • 8% of my salary will go to my investing account and will be used to invest in stocks and options.

Since I am allowed to trade stocks with margin I can afford buying stocks with smaller money and keep my expense ratio relatively small. This is why I am not accumulating in this account.

Money management, what is it and how can money management help you?

If you are a novice investor as me (and as Jesse Livermore called us “suckers”), you were probably searching for the strategy which would provide you with great results and protect you against losses. I have been searching the internet and reading books about this topic for more than two years. I have found plenty of information on this topic, but a very few were useful and understandable to apply and manage.

I have been through almost all trading strategies (the question is whether I can call my early trading as a strategy at all). At first I was making money and I became proud of myself what a trading genius I am. However later on as I traded more often and started shorting stocks the results were dropping to become worse than mediocre and after about a year of active trading I lost 60% of my account. Fortunately I realized that this is not correct and I started to do something about it. I bought my first books about investing and trading and started searching for the best strategy ever.

I met (in my virtual world of books) traders such as Jesse Livermore, Nicolas Darvas, William O’Neil and others. I liked their stories and trading success. I also liked their strategy as opposed to buy and hold 30 year-waiting-period system. I liked the idea that with some knowledge and training I can improve my return results in shorter term than saving for the whole life, and when finally being allowed to start withdrawing from a pension account, to die. When I read the Way of the Turtle by Curtis Faith (one of the turtles) about an experiment performed by R. Dennis and literally stating that trading skills can be taught and learned and no credentials and talent is required I realized I can do it as well. What I didn’t know that time was that it would take me another two years to even grasp what to do and where to start.

During my searching and learning I found many references to a money management plans. All of the sources were providing information that a proper money management can save you money and protect you against losses. However very little of those sources told me how. The only information I could get was to place 10% stop loss order below your purchase and “you will be fine”. Heck. I started collecting 10% losses. Every single trade was a ten percent loss. When I added them all together, my account suffered another huge loss. I doubted whether the market timing trading really works as many buy-and-hold strategists trumpet their warnings about this strategy to the world. There must be a way! There were many traders who lived on it! Livermore did trading for a living only and he was able to bankrupt and get back again and made his millions back just by trading. He was trading his whole life since his 13 birthday. It wasn’t a pure one time luck as some advisers may tell you about market timing. After almost three years I was able to break through and finally started working on a management which works.

The secret of the proper money management is in position sizing and limiting. With the plan I will describe later you will be able to open as many positions as you wish and as big or small as you wish and as the rules allow you! Such a plan will help you to organize your trades and if they turn against you the plan saves you money by limiting the loss to a very minimum.

Will be continued…

Posted by MartZee August 23, 2009

Picks 08/17 – 08/21

New stock picks this week:

STEC Inc (STEC)

Existing & new holdings:

Symbol Qty Last Gain($) Gain(%)
FUQI 3 24.83 -12.51 -14.38
STEC 3 34.97 0.54 0.52
V 7 69.00 33.25 7.39

Contribution this week: $0

Starting account value = $1,657.89

Account value = $1,625.41 (without margin)

Buying power = $963.01

[tag]Portfolio Gain/loss[/tag] this week = -1.96%

[tag]Portfolio[/tag] Gain/Loss for AUGUST 2009 = -4.19%

Portfolio Gain/loss for 2009 = -26.45%

[tag]Annual Return[/tag] (CAGR): -36.93%


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Posted by MartZee August 21, 2009

New position opened (STEC)

I have opened a new position of STEC yesterday:

08/20/2009    Bought  3  STEC  @  34.7894

Posted by MartZee August 17, 2009

MDRX and GMCR stopped out

Today 19 shares of MDRX were sold @ $14.8 and 3 shares of GMCR were sold @ $58.46 when both stop loss orders were activated.
Looks like the market is entering a correction phase.

Posted by MartZee August 15, 2009

Picks 08/10 – 08/14

New stock picks this week:

Fuqi International Inc (FUQI)

Existing & new holdings:

Symbol Qty Last Gain($) Gain(%)
FUQI 3 27.40 -4.80 -5.52
GMCR 3 63.37 -19.89 -9.47
MDRX 19 15.80 2.29 0.77
V 7 67.80 24.85 5.53

Contribution this week: $0

Starting account value = $1,704.52

Account value = $1,657.89 (without margin)

Buying power = $610.78

[tag]Portfolio Gain/loss[/tag] this week = -2.74%

[tag]Portfolio[/tag] Gain/Loss for AUGUST 2009 = -2.28%

Portfolio Gain/loss for 2009 = -24.98%

[tag]Annual Return[/tag] (CAGR): -36.33%


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Posted by MartZee August 13, 2009

A new position added (FUQI)

On Tuesday I have bought 3 shares of Fuqi International Inc. (FUQI). The total risk of this trade will be 3.80% of the portfolio. I set the stop loss at $21.94 which is 24.32% of this trade.

Posted by MartZee August 09, 2009

Market monitor – Sectors & Industries

Last 30 days [tag]performance[/tag] (top 5):

Basic Materials +30.05%  
Financials +28.61%  
Industrials +22.62%  
Consumer Services +17.06%  
Technology +14.75%  

(Data retrieved from [tag]financial[/tag] websites such as [tag]MarketWatch[/tag], [tag]MSN Money[/tag], [tag]Yahoo Finance[/tag], and others)


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Stock Market Analysis at DeepMarket

Posted by MartZee August 07, 2009

Picks 08/03 – 08/07

New stock picks this week:

No new positions this week

Existing & new holdings:

Symbol Qty Last Gain($) Gain(%)
GMCR 3 69.70 -0.90 -0.43
MDRX 19 16.50 15.59 5.23
V 7 69.17 34.44 7.66

Contribution this week: $0

Starting account value = $1,696.52

Account value = $1,704.52 (without margin)

Buying power = $697.73

[tag]Portfolio Gain/loss[/tag] this week = 0.47%

[tag]Portfolio[/tag] Gain/Loss for AUGUST 2009 = 0.47%

Portfolio Gain/loss for 2009 = -22.87%

[tag]Annual Return[/tag] (CAGR): -35.20%


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Dividends4Life
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Stock Market Analysis at DeepMarket

Posted by MartZee August 04, 2009

“A bear out there” hysteria

The recession, we are going through, started officially in October 2007. My personal opinion is that it actually started a lot sooner, circa at the beginning of 2007, but that is not the point I want to write about. Recently our economic data are showing some improvement and it seems that we are at the beginning of a recovery. Of course there are careers and branches out there which are still waiting for its improvement process to begin, such as new construction in residential and small commercial industry is still very slow, while housing itself is indicating some improvements.

 

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If the recession started at the end of 2007, it is 17 months since then. Even though many say that this recession is different, it actually is not. When you take a look at the entire history of recessions, you will see, that all are same as the previous. Some are longer and deeper, some are shorter and shallower. But all are exact same and there fore we may expect similar progress during this recession too.

Of course, investors shall be cautious when investing or moving money back into stocks, but there is no doubt we are already marching out of the recession. A few weeks ago I talked to a friend of mine in some party and we discussed the stock market, economic issues and someone joined us with strong words of explanation why there is no end of this recession yet and the worst is in front of us. I was looking at that person with my mouth widely open asking myself a question how somebody can be so skeptical.

Today I have read an article “Why are company insiders selling?” and in the first three paragraphs you can read that the insiders are selling because the bear is still out there and the stock market may fall again. Well it may fall and it will. It has been growing since March 09 until June 12 and then it corrected. The correction was as by books. Since then, it is growing again in a sharp pace so it is obvious that one day it will correct again, but talking about a bear out there?

I remember William O’Neil talking in his book How To Make [tag]Money[/tag] In [tag]Stocks[/tag] when public and commentators are too excited of a bull market it typically indicates its end and vice versa when they suffer from hysteria of a bear market it typically indicates its end as well.

Why I think that this is all hysteria about which O’Neil is writing? Our company decided recently to switch our 401k provider and the new one provided us with the following data:

Post War Bear Markets

Peak Through Duration (months) S&P 500
Cumulative
Price Decline
Price Gain
12 Months Later
05/29/1946 05/19/1947 12 -28% 19%
02/02/1953 09/14/1953 7 -14% 38%
07/15/1957 10/22/1957 3 -21% 31%
12/12/1961 06/26/1962 6 -28% 33%
02/09/1966 10/07/1966 8 -22% 33%
11/29/1968 05/26/1970 18 -36% 44%
01/11/1973 10/03/1974 21 -28% 38%
06/30/1975 09/16/1975 3 -14% 28%
12/31/1976 03/06/1978 14 -19% 13%
09/11/1978 11/14/1978 2 -14% 12%
02/13/1980 03/27/1980 1 -17% 37%
11/28/1980 08/12/1982 21 -27% 58%
10/10/1983 07/24/1984 9 -14% 30%
08/25/1987 12/04/1987 4 -34% 26%
07/16/1990 10/11/1990 3 -20% 34%
07/17/1998 08/31/1998 1 -19% 40%
03/24/2000 10/09/2002 30 -47% 36%
Median 7 -21% 33%
10/09/2007 03/31/2009 17 -47%

NOTE: Dates are shown in US format: MM/DD/YYYY
Source: Zephyr; LPL Financial

As you can see in the table above, recent crisis is same as the previous ones, so there is no need for panicking and hysteria as you may see in news these days. From the history we may expect another bear market in about two to three years (in worst case).


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Stock Market Analysis at DeepMarket