Monday, December 11, 2006

The Vagaries of Fortune

I don't suppose I should be so inconsistent as to presume this blog outside the influence of my oft-changing interests and obsessions so perhaps I should just blog about whatever it is I'm thinking about at the moment. Oh wait, wasn't that the kind of glorified narcissism that started the blogosphere anyway? Guess I'm going back to roots...if not my own than somebody's. In any case...

Ponderations and contemplatings about the future have made me more proactive about seeking out financial security. Real financial security is a goal for years and years down the road of course but it's never too early to start building capital. But what's a good goal? I'd say $1,000,000 would be a nice sum to hold. It wouldn't make me independently wealthy but it would definitely help support a decent life. OK, so what do I start with?


A pretty paltry sum but let's say you double your money every year. 2^10 = 1024 so you'd have approximately a cool million in about a decade. OK, but who earns 100% on returns every year right? True. How about 50% ever year? That will get you 437 times your original investment in 15 years. Let's say 16-17 gets you a million. 20% every year? That'll take you nearly 40 years.

But nobody is sitting on their butts all this time too. Putting in a few thousand each year will not only give you more savings at the end but increase your investment capital. 5% earnings per year on investment may not be spectacular and it's absolutely pitiful on $1000. You get $50! But on 1,000,000, even 5% represents a respectable sum of $50,000. It's just getting up over $1,000,000 that's difficult.

So my personal progress? Well I lied about that $2k. I actually started with $2k and put in another $1k less than a month later. Still, I started late October 2006 and now it's almost mid December 2006 and where does my account stand? $6k! So doubling in the first year has been achieved! How?

I'm fairly risk tolerant at this point because I'm a young'un and also because I don't have all that much capital to lose. So to maximize the efforts of my research and gains, I've been putting all my money into one stock. Risky, yes, but I also control losses fairly tightly and monitor company performance tightly. BRLC, so far has risen 50+% from the point at which I bought it back in October. OK, so where's the other 50%?

The other 50% almost gave me a heart attack and is not something I will attempt very often. I looked at a promising micro-cap stock that had been growing to absurd levels based on momentum alone. It had been steadily rising for more than week with accelerating gains in PPS and volume. The day before I bought the volume really started to kick in and I thought perhaps the next day it would accelerate even more. Checking up on the thought the next day, I saw it had risen by 20% already. The bounces off temporary drops and volumes all looked good to me so I went for it. By the end of the day, it was up nearly 50% from its open (and a none too shabby 17% from where I bought it). I set a sell trigger for when it dropped to +10% of my investment and waited over night.

The stock opened at at nearly +35% of my initial position the next day and was already halted. Uh oh. The news that eventually was released was basically "We don't know why our stock prices are going up." There was no question the stock was overbought. It was just a matter of when to sell. It didn't take a genius to figure out that the safest position at that point was to just sell as soon as trading resumes. I monitored news and sold a minute or two after trading resumed (caught the downward fall of a huge spike that took it briefly to +60%) for a tidy +40% profit.

Putting all my investment eggs in that one basket is risky for sure but I was set for at least 10% or so after the first day. Risk = reward I suppose. But now that I'm at 6k, I'm eyeing a 50% gain to end up near 9k by late april (half a year from my starting date). It's a rather lofty goal but I have faith in BRLC, especially over the holiday quarter. If BRLC meets its target of 14, I'll be pretty close to that 60% already.

The one downside of all this is that in buying my short term speculative stock (ATA), I missed a 6% jump in BRLC today. I knew something like this might happen soon so I'll just have to offset that with my 40% earnings to come out a bit north of 30%. Still not bad for a few days. As soon as the SEC allows me to trade though it's back in to BRLC I go.

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