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Magic Charts Newsletter
May 3rd, 2002 |
This issue includes...
1) "New features in Magic Charts !"
2) "How is the sample portfolio ?"
3) "Pro's and Con's of lending money on the portfolio"
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1) "New features in Magic Charts !"
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Starting today we have extended the Magic Charts modules with
the London Stock Exchange. We start with the FTSE 100 and 250
and a selection of the best looking UK stocks.
We also included the GB pound vs USA dollar chart to be able
to have the GB pound as the default currency.
That way it is possible to have a portfolio with a mix of
stocks from the US, UK and Europe. Just decide in which
currency you would like the totals of your portfolio, US
dollars, GB pound or Euro's !
We have added the UK share Havelock Europe to our sample
portfolio.
If you don't already have a subscription
to the Magic Charts
and you would like to see the LSE Charts subscribe to a
FREE one month trial of the Magic Charts!
Download the demo from our website at:
http://www.magiccharts.com/download
After installation, it will generate a base code with which
you can subscribe to the free trail.
Or even better, subscribe to the Magic Charts, and get one
month for free!
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2) "How is the sample portfolio ?"
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Our sample portfolio is on 19.8% gain, a nice improvement
over last month. At present speed we will end up around 70%
at the end of this year!
We sold Owens-Illinois last week due to the fast drop they
made after the announcement of the annual financial report,
apparently a lot of stockholders decided that it was time
to sell.
We bought for $18.300 each:
Sharper Image Corp
Intermet Corp
Havelock Europa (UK share)
There is a screen
shot of the sample portfolio on the bottom
of this page.
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3) "Pro's and Con's of lending money on the portfolio"
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We get a lot of questions about whether or not borrowing
money on the portfolio, like we do in our sample portfolio.
First the Pro's:
1) All the money you make on the borrowed part of the
portfolio minus the interest is extra margin.
If you have a portfolio of say $10.000 and you borrow an
extra $10.000 at 7% interest on your portfolio, you are able
to buy for $20.000 shares.
If you make 20% on that $20.000 portfolio = $ 4.000 minus
$700 interest = $3.300,- rather that 20% of $10.000 = $2.000
and you still invest only $10.000, your result is 33%!
2) You are able to buy more shares when your portfolio grows
without selling shares first. That way accelerating the
grow of the portfolio.
If you start again with the $20.000 portfolio, and after some
time you gain 10% = $2.000 you are able to buy for $2.000
extra shares, that way your portfolio grows to $24.000
Then the Con's:
1) borrowing money on your portfolio means that you are
responsible for the money you borrow.
If you have $10.000 and borrow an other $10.000 to it, and
you lose everything, you not only lose your own money, but
you also owe the bank $10.000!
Fortunately it is pretty hard to lose everything if you
trade stocks, stocks contain a certain value, although that
value can be much lower then everybody expect when a company
is creative in bookkeeping (like Enron) or the stocks are
hyped, like we have seen with the Internet stocks.
It is still possible to make a lot of money from those stocks
but be sure to dump them when they are going under the 20%
from there highest point!
2) Your leverage on the portfolio works both ways, when the
portfolio rises, it rises fast, but when it declines it also
drops fast!.
(and you still have to pay interest over the borrowed part)
What to do?
We checked what would have happened last year if we bought
the same stocks (when possible) without borrowing money on
the portfolio.
Our result dropped to 23.2% rather than the 102% we made
last year. still not bad with the DJ at -14.5%, the Nasdaq
at -21.1% and the S&P 100 at -14.9%!
We use a mechanism to lower the borrowed part on the sample
portfolio when the stock market takes a beating, that way
lowering the down force on the portfolio.
See our previous newsletters for more information about the
way we handle our sample portfolio at our site at:
http://www.magiccharts.com/portfolio
If you subscribe to the Magic Charts, you will be send an
updated version of the sample portfolio every day!
So you know exactly what we do to get such nice results!
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Copyright 1998-2002 by Magic Charts. All rights reserved.
This document may not be copied in part or full without
express written permission from the publisher.
Trading in stocks involves risk. You can lose money. We are
not making recommendations to buy or sell any stock. We share
our views about how to trade stock.
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Magic Charts sample portfolio per 05-02-2002
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