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Time to get real.
We've had 3 Workshops so far on fixing our portfolios this week:
- Portfolio Repair Part 1 – Damage Assessment
- Portfolio Repair Part 2 – Resetting Your Positions
- Portfolio Repair Part 3 – Adjusting our Hedges
Now we move onto a very important topic that combines what we have learned and that is Adjusting our Goals. I talked about this on Tuesday (Part 2) in the Boeing example for someone who bought Boeing at $350 and now it's $150 (today it's $123!) and we do not sit there and HOPE (not a valid investing strategy) that BA will go back to $350 because it's no longer realistic!
As much as you may love a stock – you have to be realistic when there is damage done to it's financial position or outlook and you have to adjust your expectations accordingly – perhaps even considering abandoning the stock altoghether – especially in times like these when there are other fantastic stocks on sale and, even as I say this, I'm thinking that BA is not really a fantastic stock anymore – they simply have too many troubles to be excited about them – even at $123.
So today we'll take a look at our Earnings Portfolio, which started out with $100,000 on October 21st and was originally supposed to be just quick earnings plays but, the way things went, we ended up getting "stuck" in some good bargains (or we thought as the time) and we rolled them into longer-term bets. So now it's a bit of a hybrid but that makes it interesting. At the moment, we're at $132,078 so up 32% for the year but, as you'll see – NOT because our picks were any good – but because our HEDGES saved us!
Notice we have more cash than the portfolio has value – that's because we follow our core Philosphy, which is: "Be the House – NOT the Gambler", which means we always try to be sellers of premium, not buyers and that gives us a huge advantage in our trades while also dropping a lot of cash into…