I Still Can Hear A Heartbeat! (my Grow Your Dough update)

It’s time to report.

The good news: I’m not yet out of the running. In fact, if you take away my friend Sandy, who’s counting a job as investment income, I’m rockin’…. (That sounded harsh. If Sandy wants to count her sweat equity as an “investment,” who am I to complain? I say ice cream is fat free after 10 pm….)

This was a busier month for my Grow Your Dough portfolio than I’d expected. If you recall, this time last month the market was on a sharp decline and I ended my post by writing that there was a good chance I’d still be sitting with a single stock by month’s end.

Boy, what change a month brings!

Before I share my new positions and progress, let me remind you of my goals and guidelines:

Joe’s Grow Your Dough Contest Guidelines:

I’m not investing as I would normally. I’m a long term buy-and-hold investor in real life. However, I decided to attempt and win this contest. Any challenge that lasts 12 months and uses equity-based investments is, at its heart, a crap shoot. Stocks aren’t short-term vehicles. This contest shouldn’t be called a “Grow Your Dough Challenge”….it should be called “Spin the Roulette Wheel Challenge.”

I have to differentiate my portfolio to have a chance to win. I’ll need to take some chances and think “contrarian.” Knowing a few of the bloggers participating, I was fairly certain that I’d be up against some ETF strategies that would be fairly straightforward and well diversified (I was correct on both counts).

I’m going to use whatever trading tools are at my disposal, and I’ll try to teach along the way….as long as you realize that this is a fool’s errand. (Have I mentioned that enough yet?)

Okay. Those out of the way….let’s take a look:

February Recap: The market roars back

As the US stock market turned upward again in February I faced a tough decision.

– If I stayed on the sideline with most of my money (I’d invested in a single mining stock in January), I could miss a huge rebound.

– If I jumped in with both feet, I could lose a ton of money if this rush was a feint. 

What should I do?

Teaching note: Okay, this is the first spot you DON’T want to be in as an investor. If you’re trying to monitor where the market is headed, you’re screwed. It’s far better, in a long term strategy, to dollar-cost-average into a volatile market. Sure, you might lose out on a few bucks if the market keeps going up, but you won’t have to worry about investing all of you money at once only to have the market sink, either. Remember: you have no clue where the market is going tomorrow, and you should invest as if you have no clue.

I decided that I had to get into the market, but I could only participate marginally in the rebound. Why? Because there was a good chance that was what everyone else would be doing! Instead, I had to find laggards that I thought might come back stronger in the near future.

That’s why I bet on emerging markets. Rather than moving into a single country, though, I decided a broad index would be a safer option (not “safe” in the sense that emerging markets are a “safe” place, but a safer bet that a broad index will grow vs. a single country ETF). As you may know, emerging markets missed most of last year’s run up and while a few big brokers still think it’s a tough place to invest, the early birds are already out buying. I joined in.

First, I’m fairly certain that emerging markets will be ignored by most of my competitors. Second, to spike my punchbowl, I decided to do something a little more risky: I invested in EDC – the Daily Emerging Markets Bull 3X Shares. This fund is 3x leveraged, meaning that it’s going to move roughly 3x whatever Emerging Markets moves on any single day.

Teaching note: This is a highly speculative move, and could end up sinking my ship singlehandedly. In real-life investing I wouldn’t make such a play (it’s too risky), and second, if for some reason I did, I’d have a stop loss attached. 

On February 26th I bought 15 shares of EDC at a total cost of $351.70.

Countering This Move

Now I knew, with a mining company and wildly-swinging emerging markets fund, that I could be in over my head. I needed SOME stability in my portfolio, so I decided to go large cap immediately to offset the huge volatility.

I again eschewed the US to differentiate the portfolio. I needed a stock that might move up with the US but one that had an opportunity to float if the US market declined again. I chose Ambev (ticker ABEV) – I have a variety of reasons for this trade (I can go into this in a future post if there’s any interest in that level of granularity), but the main ones are this: alcohol sales continue during down markets and Ambev is well situated in the global marketplace.

On February 26th I bought 30 shares of ABEV at a total cost of $221.20.

My Mining Stock Results

As I mentioned previously, I’d hoped that mining would rebound, and it did….and not long after I’d bought some. Since buying DNN on January 17th for $1.30 per share, the price is now at $1.64.

What Am I Going To Do With The Remaining Cash?

I have no clue.

I’d love to round out the portfolio more, but there don’t seem to be any opportunities that have presented themselves that fit $160. I have to choke down an $8 trading fee, so that 5% load is going to weigh heavily on any purchase.

Overall Grow Your Dough Results

On 2/28 my account stood at $1,055.44.

YTD that means I’m up 5.54% vs. an S&P 500 that’s up only 0.96%.

Am I happy?

….10 months to go…..