I am presenting you with my weekly results of my effort in building my money making machine. See my investments and their results in my three accounts: Trading account, which is my aggressive portfolio buying individual stocks, my ROTH IRA retirement account which is my dividend investing portfolio and an account with Lending Club – my other money making opportunity.
Trading Account:
New [tag]stock picks[/tag] this week:
Stocks bought or added to portfolio this week:
none
Stocks dropped from portfolio this week:
none
Stocks watched this week:
none
| Existing & new [tag]holdings[/tag]: |
| Symbol | Qty | Last | Gain($) | Gain(%) | Stop | ATR | Risk to stop (%) |
| [tag]V[/tag] | 20 | 75.59 | -10.39 | -0.68 | 67.28 | 2.2800 | -11.60 |
| Contribution this week | $0.00 | |
| Current [tag]capital exposure[/tag] | -11.80% |  |
| New positions available to open | 0 | |
| Starting [tag]account value[/tag] | $1,496.17 |
| Account value (without margin) | $1,578.97 |
| Buying power | $67.17 |
| [tag]Portfolio Gain/Loss[/tag] this week | $5.53 |
| [tag]Portfolio[/tag] Gain/Loss for JULY 2010 | 3.15% |
| Portfolio Gain/Loss for 2010 | -46.15% |
| [tag]Annual Return[/tag] (CAGR) | -35.49% |
Last week was quite interesting. The markets were like in a roller coaster. Most moves were pure volatility, news driven and hype in my opinion. However the move which happened on Friday changed the status of the market to a Confirmed Rally.
I am also changing my strategy a bit in my trading account. I will be investing into HSTIX index fund creating a core of my portfolio and invest into individual stocks only surplus money saved on top of the fund holdings. The reason is that I want to have a NTF fund in which I can park free money before I invest them (basically I want to do the same thing what I do in ROTH IRA account using the NTF fund to save larger amount which I can invest to lower the trading cost) and create a stable core of the portfolio.
I am also thinking to change my stop loss order trailing method. Typically I was trailing the stop loss based on Average True Range (ATR) value every Friday. I used ATR value multiplied by 4 and I subtracted the result from the current price to setup the stop loss price. For example Visa (V). The last close price on Friday was $75.59. Its ATR value was 2.2800. Multiply this value by 4 (some investors use 2.5 multiplier, but over time I found this range too short in this volatile market) and subtract the result from current price: 2.2800 * 4 = 9.12; and $75.59 – 9.12 = $66.47. If the number was higher than my previous stop loss, I moved the stop loss higher to the new value.
This range gave the stock enough room to eliminate daily volatility and enough power to get me out of the position during the trend reversals. But next time I will use the value volatility as well. If Visa’s (V) regular ATR value is in 2 – 3 range I will move and invest in the stock as I did so far, but if the ATR value rises above this standard range as it happened in May and June this year then:
- I will not invest in the stock or open new position in such stock
- If the stock is in uptrend I will be trailing the stop loss slowly (maybe every two weeks instead of every week)
- If the stock reverses and will be in downtrend I will let it sell on the original stop loss (or if the market is in downtrend I may sell earlier), but buying back will be postponed as long as the ATR gets to its standard range
I hope this would help me eliminating jumping to the stock too early when the stock is extremely volatile and any new trend may be unsustainable as it happened during this correction.
Lending Club:
| Debt notes |
| Available cash: | $0.83 |
| In Funding Notes: | $25.00 |
| Outstanding Principal: | $584.80 |
| Accrued Interest: | $3.51 | Account Total: | $614.14 | Net Annualized Return: | 11.52% |
| Contributions this week: | $0.00 |
| Weighted Average Rate: | 12.45% |
| Expected Monthly Payments: | $19.64 |
| Payments to Date: | $51.43 |
| Principal Payments: | $40.20 |
| Interest Payments: | $11.23 |
| Late Fees Received: | $0.00 |
| Notes Invested In: | 25 |
| Average Note Amount: | $25.00 |
| Net Annualized Rate to date: | Higher than 55% and lower than 45% of all investors. |
When I started investing with Lending Club I didn’t have a plan yet – sometimes I start things backwards and learn on the go. Because of this I purchased some notes which no longer fits my criteria. I have bought a loan which amount was $25,000 with a monthly payment of 840 dollars. As I wrote in my previous post, this is quite large amount of money and therefore such a borrower may most likely default. Sure enough, this borrower from San Diego, CA made his first payment and his second which was due a few days ago has already failed. The note is in Grace Period, however I am expecting this loan to fail. It is a good example, why it is so important to keep investing with Lending Club as diversified as possible to minimize the loss.
ROTH IRA Account:
New [tag]stock picks[/tag] this week:
Bought 7.342 SICNX @ 6.81
Existing & new [tag]holdings[/tag]:
| NTF Mutual Funds |
| Symbol | Qty | Last | Gain($) | Gain(%) | Div. Y(%) |
Port. (%) |
| AIGYX | 83.472 | 13.60 | 135.22 | 13.52 | 5.34 | 25 |
| ATIPX | 106.395 | 9.16 | 34.40 | 3.66 | 6.94 | 21 |
| GABUX | 77.118 | 6.24 | 10.42 | 2.21 | 4.10 | 10 |
| HISIX | 26.918 | 6.75 | -18.30 | -9.15 | 4.73 | 4 |
| HSTIX | 37.325 | 8.22 | 11.94 | 4.05 | 3.36 | 7 |
| SICNX | 76.987 | 7.00 | -11.09 | -2.02 | 4.83 | 12 |
| SWDSX | 62.474 | 11.48 | 13.03 | 1.85 | 3.70 | 16 |
| SWLSX | 29.814 | 9.64 | 18.48 | 6.87 | 2.16 | 6 |
| Individual ETFs |
| Symbol | Qty | Last | Gain($) | Gain(%) | Div. Y(%) |
Portfolio (%) |
| IGD | 29.0 | 10.77 | -44.37 | -12.44 | 11.07 | 100 |
| Individual stocks |
| Symbol | Qty | Last | Gain($) | Gain(%) | Div. Y(%) |
Portfolio (%) |
| JNJ | 23.0 | 57.63 | -28.28 | -2.09 | 3.65 | 100 |
| Account target and current allocation |
| Individual stocks | $1,325.49 | 42% | 21% |
| NTF Mutual funds | $4,623.04 | 38% | 74% |
| ETFs | $312.33 | 20% | 5% |
| Asset Allocation vs. Wilshire 5000 | Portfolio (%) | Benchmark (%) |
| Large Cap Value | 40.30 | 37.25 |
| Large Cap Growth | 31.63 | 36.60 |
| Mid/Small Value | 19.77 | 13.45 |
| Mid/Small Growth | 8.30 | 12.72 |
| Stock Stats | Portfolio | Relative to S&P 500 |
| Avg. Expense Ratio | 1.05 | |
| P/E Ratio | 13.73 | 0.90 |
| P/B Ratio | 1.93 | 0.93 |
| ROA | 6.91 | 0.97 |
| ROE | 17.73 | 0.96 |
| Projected EPS Growth 5yr% | 7.61 | 0.81 |
| Yield % | 4.72 | 2.13 |
| Contribution this week | $0.00 |
| Starting [tag]account value[/tag] | $6,147.18 |
| Account value | $6,263.76 |
| Dividends received in JULY 2010 | $11.20 |
| Dividends received in 2010 | $211.58 |
| Portfolio dividends yield 2010 | 3.38% |
| Portfolio dividends yield lifetime | 4.72% |
| Dividends received lifetime | $295.70 |
| [tag]Portfolio Gain/Loss[/tag] this week | 1.90% |
| [tag]Portfolio[/tag] Gain/Loss for JULY 2010 | 4.53% |
| Portfolio Gain/Loss for 2010 | -6.38% |
| [tag]Annual Return[/tag] (CAGR) | -4.85% |
| [tag]Portfolio Return[/tag] since inception | -16.20% |
I am satisfied how this account performs so far. Even the markets suffered losses during this correction my ROTH IRA actually held its level with minimum drops and it is recovering quickly. It actually is recovering my previous loss which happened at the time I had no idea what to trade in this account when I had no plan at all. The dividend investing works well in this volatile market. I also read some books recently on long term, value and dividend investing and I feel pretty confident on holding my positions even when they are losing, such as Johnson & Johnson (JNJ) which lost quite a big chunk of its gains during last two weeks, but mainly because of its earnings growth outlook, which in my opinion is totally unimportant from long term perspective. One weak quarter means nothing unless it will be happening in upcoming quarters too or the company cuts dividend. That didn’t happen during 45 years of steady dividend growth, so from long term perspective Johnson & Johnson is still a good investment and this weakness is a great opportunity to buy. Another woe pushing this stock down were negative news & headlines in regards to this company and its recalls of the product, but not any extremely serious negative fundamentals, so this drop is in my opinion an overreaction, which may potentially attract fundamental investors and bargain hunters. See the following post “Will Johnson & Johnson’s woes attract Warren Buffett?” by Bill Freehling. I believe he has a point here.
I also changed my target allocation a bit and gave more stress on index fund holding rather than equity funds. Even though my funds are mostly for accumulation purpose in my portfolio and I want to focus on individual dividend stocks and ETFs I wanted to save more in index fund. I increased my target allocation in HSTIX fund up to 28% of my portfolio.
A friend of mine has asked me recently why I was investing in an index mutual fund rather than directly to the spider SPDRs (SPY). I am planning on buying some shares of this ETF, however now I do not have minimum $2000 to invest. Investing this amount to an individual stock or ETF is one of my rules to mitigate transaction costs. Therefore I am investing to HSTIX which is a no-transaction-fee fund and I can invest as little as one dollar and as long as I save 2000 dollars I will sell my position in the mutual fund and buy SPY.
I also applied for option trading in this account which has been approved and I start preparing myself and learning better writing covered calls to boost my income. It won’t happen immediately of course, but I have the account ready to do it. I like the idea to boost the stock growth as you can read in the following article “4 Dividend Stocks You Never Knew About” which I originally found on Dividends4life web site.
This is an interesting topic. I’m always looking for relevant resources to show clients and my coworkers, and your article is without a doubt worth sharing!