Market Close Sept. 30, 2013 – Adding Money

Monday, September 30, 2013

During the past three  years, my investment journey has followed a path that has led me inexorably to Index ETFs where the risk is top down, transparent and diversified.

Vanguard’s VTI represents the pinnacle vehicle for this type of investing…. the Total USA Equity Market….. a basket of over 3,500 holdings.

There have been only four round trip trades in VTI since April 30, 2003 ( using a trade at month end only methodology ) ….all four trades were winners,  with the average gain 23.45%.

The fifth and latest VTI trade is still open…..open since December 30, 2011….( 437 days )  and as of the close September 27, 2013 has appreciated 41.93%.

I am trying to gradually get in sync with that trade  by dollar cost averaging into a profitable position.    In fact, since it is September 30, I’m getting ready to invest a further 20% of my capital in VTI and its cousins.  VTI closed today at $ 87.65…..6.7%  above its 200 day moving average.

The  last part of my investment program will take place after the market close  November 30, when I am scheduled to invest a final 25% in the program,  IF….., VTI closes above its 200 day moving average on that date.

Never Say Never

I believe that the average investor, ( you and I ) , should not invest in individual equities.  However, over the past 10 days I have bought 1100 shares of Facebook at an average cost of $44.75 per share.  Why ?  My nephew Rick Waters, is a Search Engine Marketing Guru from Delray Beach  / Boca Raton, Florida .  He understands Facebook’ s business model and strongly believes we are looking at a mega bagger equity.  He has been invested since day one of the public offering  and has never wavered.  I totally respect his views on this and believe his expertise gives me an  edge.   I am buying my Facebook via a tax deferred IRA, so it means I can postpone the tax consequences if my trailing 5% stop is activated and results in a realized trading profit.  Between his expertise and my  5% trailing stop, I feel  far more protected than I ordinarily would with an  equity investment.  My only concern is in finding the  correct re-entry point if I am stopped out of my position , since I intend to stay close to the Facebook  rocket as it continues its post orbital ascent.

Back to the VTI front…..

As the market grinds higher,  VTI’s 200 day moving average will be dragged higher with it..  At the moment VTI’s 200 day moving average,$82.14,  would need to be $86.13 ( my average cost ) for me to breakeven should it violate its 200 day moving average.   If VTI were to violate $82.14 at a month end,  I would stand to loose at least  4.6% on my investment.  At the end of August I would have lost 6.96%.  At the end of July, I would have lost 8.89%. based on my average cost.  So, VTI’s 200 day moving average is gradually  moving in the right direction…. higher,  thus reducing my contingent loss ( entry fee ) for getting in sync with the program.

The November 30, 2013 close will dictate whether or not I’m to remain invested and where I am in relation to my cost and the 200 day moving average.

I intend to wait patiently until November 30 for the possible next leg of my involvement with VTI, while keeping a tight leash on Facebook.

 

Richard Maurice Gore

 

 

 

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