OTHER SYSTEM MECHANICS WORTH KNOWING
– ADDING ADDITIONAL MONEY
I didn't include an example of adding additional money to a stock. It is very easy. If you have for example an additional $1,000, you tell your broker to buy $667 worth of stock and put $333 in your money market account ( on a 2/3 shares, 1/3 CASH type of investment).. Then you increase PORTFOLIO CONTROL by the same amount (667) you bought stock with. Make a separate line on your spreadsheet to show the increase. Change all the columns that need changing. See chart for Claire’s Stores at the end of this Chapter for an example. It's very easy to add money to an existing stock. You should do it to increase the size of your investment and decrease the cost of commissions and increase profits. As you read later, you should try to build up to 10 stocks, ETFs, closed-end funds, LEAPs to reduce risk. Also I recommend only adding money to an existing stock when the stock price is at or near its 52-week low.
- SKIPPING A MONTH
In several charts in this book, you'll see dashes across one whole month except for INTEREST. For these months you skipped the system – it's not a rigid system you must do every month or whatever schedule you use to check on your investments with AIM. For these months the only thing that happened was earning INTEREST on your CASH. You only needed to write in the INTEREST earned that month and then you added and then next month you can add two months INTEREST the next month when you go back to the system.
- STOCK SPLITS
Another thing I wanted to tell you. For stock splits, I figured the split after any of the transactions. For example, if you own 500 shares, sold 100 shares and then the stock split 3-for-2 than your calculations were: 500 – 100 = 400 X 1.5 = 600 shares now owned. You only need to change the SHARES OWNED column. I have included a blank spreadsheet you can copy in use at the end of the Adobe Acrobat version of my book that you will receive for free after buying this e-book version.
- READJUSTING THE CASH/STOCK RATIO
One last item. At least once a year, readjust the stock/cache ratio to whatever ratio you are using for your particular type of investment. Different types of investments could have a different ratio between CASH and STOCK. I didn't do that in this chapter except once to keep the example simple. It's easy. Look at Chapters 15 and 16. Once the year I adjusted the stock/cache ratio back to 1/3 cache and 2/3 stock.
If the CASH balance was higher than 1/3 of the PORTFOLIO CONTROL, I took the excess CASH and bought more shares, and increased PORTFOLIO CONTROL by 100% of the CASH amount I used to buy more shares. Look at how I did it and you'll understand. Do this anytime you readjust the cash/stock ratio.
At the end of Chapter 2 in the Adobe Acrobat version of my investing book, you will find a spreadsheet showing Claire’s Stores for the entire two years and you will find a blank spreadsheet that you can you can use to set up an Excel spreadsheet to do your investing online.