It is the end of 2009 year. We saw a lot on the market and the entire economy this year. We saw a recovery finally breaking up and we saw the market showing incredible growth providing spectacular gains that many investors and analysts could not believe in this trend and expected the market to fail. A few started recently accepting the trend and now they are recommending investing into stocks again.

It is the end of 2009 year. It passed so fast! I still cannot believe it is already over. Now, it is time to stop for a while, look behind, do some balancing and set new goals for upcoming year. I reviewed my last goals and tried to identify new goals for upcoming year. The goals I am going to talk about are only for personal finance and trading, not personal life, which is not your business guys.

When I looked back I must admit two things:

1. My goals were very, very vague and without any measurable outcomes with specifics (except a few exceptions).
2. I learned a lot during this time and some of my lessons were very costly as I mention later.

Let’s review, what my goals were a year ago:

• build my long term emergency fund and rise its balance back up to $5,000
• learn more how to invest into stocks and options successfully and make min. 20% profit on stocks
  learn options to make min. $100 a month income

(see more here)

• My first goal is to learn how to enter and exit trading positions and how to properly evaluate stocks for potential investment by the end of August 2009. During this period I will use paper trading.
• My second goal is to eliminate losing trades and make smaller loss. Achieve 20% gain by the end of 2009.
• My third goal is to learn trading successfully so I can trade for a living by the end of 2011.

(see more here)

I definitely met my first goal and I have an emergency account with $5,000 in it. I learned how to invest into stocks, how to evaluate them, exit and entry positions, but failed to profit on it. It was unrealistic and too optimistic goal. Since my portfolio was in deep loss of about 30%, it would require 70% profit to end up with 20% gain as planned. Nevertheless, I was able to reduce the loss down to -14.5% for the year by almost 7%.

I completely abandoned trading options for now, because I wanted to focus on socks first.

Was the 2009 year a failure? Not at all! I actually think it was a great success, because I learned a lot of new things and I was finally able to establish a sound strategy of investing and trading. So what did I achieved?

1. I created a great management plan, which is protecting my portfolio against uncontrolled risk. Now I know exactly how much I would lose if the trades go against me and I am able to eliminate loses to very minimum. Thanks to this management strategy I cut loses quickly, taking small losses and let my winners run. This process wasn’t easy however and before I found the proper way how to protect the portfolio I lost quite a bit of money – 21% loss in one month! Just because of a little mistake in calculating risk using wrong inputs.
2. I created an investing strategy and a plan how and what I want to invest in. For this I am so grateful. Before I realized what I wanted, my investing was one big random walk without an idea of what I was doing. I had three investing accounts and I had no clue what to do with them and this ignorance cost me money and opportunities. If I have had a clue at the beginning of 2009 I could make a lot of money to pick up the trend a lot earlier than at the end of June 2009 or September 2009 (in regards to my ROTH IRA account respectively). But I am glad I have a plan for my three accounts:
   – 401(k)
   – ROTH IRA
   – individual trading account (play money)
3. I learned some patience and finally realized that I do not have to trade everything and all the time for all costs, if there are no opportunities. Thanks to my management plan I learned I could stay aside if the risk management plan indicates zero new positions available and that I shouldn’t buy stocks right after they appear in my screener. The world won’t come to an end. I could buy the stock later for the same price or better and still make money on it.
4. I learned how to screen stocks and evaluate it better so I am more confident when buying a new stock. I still need some improvement on this, but I want the evaluation process as simple as possible, but providing reliable results. I do not want to spend hours and hours on evaluating stocks, I want my screener to come up with good candidates, then review fundamentals and technicals and if satisfied buy a stock.
5. I have read a lot of books during this year and I am planning on reading more. I re-read some of them as well. When you read books about investing twice or three times, you always find something new, you missed the first time.

What is my long term goal?

I created long term goals and the plan for 2010 is a part of it. Let’s take a look at my long term goals.

1. I want to save enough for my retirement and I want to boost my savings to get there as fast as possible and retire in 20 years from now.
2. I want to trade for a living in 10 years from now (by 2020).

To reach those goals I created a 5-year plan:

My 5-year plan:

1. Pay off all credit cards debt by the end of March, 2010
2. Contribute to raise value of my trading account to $3,000 by the end of March, 2010
3. Pay off my personal debt to my long term emergency account by the end of November 2010 (as I wrote in one of my posts I treat any withdrawals from my emergency account as a loan and pay it back as a regular bank loan.)
4. Increase the value of my short term emergency account to 2,000 dollars by the end of March 2011
5. Increase the value of emergency account to $10,000 by the end of July 2011
6. Contribute additional $10,000 to my ROTH IRA by the end of May 2013
7. Increase ROTH IRA portfolio yield to 10% by the end of 2013
8. Contribute additional $5,000 to my trading account by the end of March 2014

The goal for 2010 year:

I want to focus more on my ROTH IRA account this year. I have read a lot of books about long term investing and the result of my readings was that the best strategy would be investing into dividend stocks. So with this account I am joining the dividend stocks club. Buying stocks paying dividends and then reinvesting them would boost my savings significantly.

Since I am still in accumulating phase my strategy for this year would be:

1. Saving and investing into NTF (no transaction fee) high yield dividend mutual funds as long as I save 30,000 dollars.
2. When the goal amount is reached, sell $16,000 and reinvest into high yield dividend paying stocks or ETFs.
3. Minimum amount for each individual position in a single stock or ETF is 2,000 dollars to keep costs (of commissions) as low as possible.
4. Invest any lump sum of money equal or higher than $2,000 directly into dividend paying stocks or ETFs, smaller amounts shall be accumulated in NTF funds.
5. Increase portfolio yield up to 4% by the end of 2010.
6. Investing into high yield dividend NTF and individual stocks should be a core of the portfolio, investing into ETFs shall be aggressive and riskier portion of the portfolio. ETFs will be high yield dividend funds paying the dividend monthly.
7. All dividends will be reinvested. Reinvesting of the dividends will be not to the stocks or funds which generated the dividend, but to the stocks or funds which will be under-allocated.
8. Learn options strategies to use it to generate higher return (the options will be used when the portfolio will hold individual stocks allowing opening at least five options contracts).

I will start another category about my ROTH IRA to show my progress in this goal.

In regards to my individual trading account I want to focus on learning. By the end of 2010 I want to learn better stock picking strategy, entry / exit strategy, create investing rules and learn defining my reasons for buying or selling stocks.

I have a money management plan, which does great job to me so far, but other aspects such as exact entry/exit rules and investing rules are still my weakness and I want to learn this better.

For 2010 I wish to accomplish the following with my individual trading account:

1. Investing into small and mid-cap momentum stocks to boost the account growth. I understand higher risk these stocks have and I accept it.
2. Eliminate losing trades as quickly as possible.
3. Let the winners run as long as possible and use trailing stop loss as exit strategy.
4. Learn entry strategies based on technical analysis, define entry and exist strategies (besides trailing stop loss) and put it down on the paper
5. Use two time frame screening on weekly time frame first and then on daily time frame, larn to identify signals from those screening strategies and put the rules down on the paper. Learn investing based on those rules.
6. Get the account into green numbers by the end of the year and generate at least 10% profit for the year 2010.
7. Open new positions only when the money management calculations indicate the total calculated percentage risk on all open positions to their stop loss to be zero or positive numbers so when all open positions turn against me, the portfolio won’t lose such a significant value as it happened at the end of 2009 year. Although the loss in the last week of 2009 was less than 3% of the entire portfolio, it could be a lot less if this rule has been applied.

Dear fellow investors, I wish you a Happy New Year and a lot of success in the new year 2010.

(photo source)