Today is the start of the Grow Your Dough Throwdown. I’m competing. This is my post sharing my investing strategy for the Throwdown.
The Throwdown is a fun challenge my friend Jeff Rose from Good Financial Cents cooked up. It’s simple. Take $1,000 at the beginning of the year and invest it in whatever you want: stocks, mutual funds, ETFs, real estate, a business, gold…whatever. Whoever has the best return at the end of the year is the winner.
Feel free to join in on the Throwdown with your own investment. Here’s what I’m going:
Over the past year and a half I’ve started dabbling in individual stock speculation. You may remember my IPO purchase of Facebook (FB) stock in May of 2012. I ended up picking it up for $32 and held it till this past October, when I sold it at $52, profiting roughly $250.
Then I purchased Zone Technologies (ZHNE) for $4.02, and sold it for $5.53 on December 31, 2013. All in all, my initial $450 investment in Facebook has turned into $1,000 cash, which I’m now going to use for this Throwdown.
I’ve decided that to have a shot at winning this Throwdown, I’ve got to enact a more active, short-term, speculative approach.
My plan is to stick to the method I used for the ZHNE pick. That method is to choose a stock that has positive momentum. I simply visit Barchart.com and review the top signals stocks page. After several minutes to hours of looking at charts and latest news articles I get comfortable with one stock. I then head over to Sharebuilder.com, where I have a broker account, and place a $6.95 trade to purchase the stock.
My plan will be to hold the stock until it gains 35%. Then I will sell. If the stock dips by 10% then I will limit my losses and sell and look for another stock. If the stock does not reach 35% in one month I will sell and look for another stock.
First up, I ended up picking Adept Technology Inc (ADEP). It’s currently trading at $16.89. I’ve already purchased it and I’m now holding. Following my strategy, I will place a limit order in Sharebuilder to sell at $22.95. Alternatively, I will place a limit order to sell at $15.20.
While I’m using this approach, the Throwdown isn’t meant to encourage speculation or the idea that you can get rich quick with risky, short-term investing. You are more than welcome to use the Throwdown as an excuse to get going with your own tax-advantaged retirement investing – something that should always take precedent over taxable investing.