Screening for Trend/Momentum Stocks

Episode 3: Building a Trend/Momentum Portfolio

Finding the rockets

Let’s get right into the nitty gritty of identifying trend/momentum stocks. I have a two step process to find them. Most people that I know of have built a computer program to track these items, but I don’t have the money or the time to accomplish that level of expertise. Maybe that will be my downfall, but I am enjoying this current development process for someone without the initial capital or time to invest in a computer program.

My first stop is a website called Finviz.com. It has a lot of free information and then a monthly plan if you want more capabilities. For now, I can screen stocks with the characteristics that I need (to a certain extent) and make some small adjustments from those characteristics when completing my second step.

Finviz also allows you to track your portfolio of stocks on a daily basis (up to 50 total stocks for a portfolio) and then work with those stocks in a screener. I love this feature because I can take the 30-40 stocks that I already own and look at them in different ways to see if they are overvalue, undervalued, close to their moving average, etc. Finviz.com looks like the below.

I click the Screener option, which you see in the top tool bar. Once in the screener, it shares a list of all publicly traded stocks. In order to pare down those stocks, they have three tabs: (1) Descriptive, (2) Fundamental, (3) Technical. As you can see below, I only use the Descriptive and Technical tabs. For the Descriptive tab, I choose the following aspects: (1) +Small (over $300MM) under Market Cap, (2) Over 500K under Average Volume, and (3) Over $5 under price.

I have chosen these three because I want to eliminate the hyper volatile stocks below a market cap of $1B. Finviz only has over $300MM, so on my next step I eliminate those under $1B. I also want the stocks to be heavily traded so I can sell them at any size and above $5 in price to eliminate any penny stocks. Then I click the Technical tab and choose the following three attributes: (1) Quarter +30% under Performance, (2) SMA20 above SMA50 under 20-Day Moving Average, and (3) New High under 50-Day High/Low.

With these indicators, I want to see the stock’s price trending in the right direction, so the 30% performance in 3 months, the average short term price over the last 4 weeks tracking higher than the average price over the last 10 weeks, and a new high in the last 10 weeks of trading. Finviz allows me to save this screen, so every Friday after the market closes, I pull this list of stocks. I shed the stocks that have a market cap under $1B and over $50B, and then write them down for my second step which involves Yahoo! Finance.

Yahoo! Finance has a great feature for their stock charts. You can set up indicators so that every time you open up Yahoo! Finance, they will plot them on the stock chart for you. To set them up, search for the first stock on the screened list. Below I have shown my indicators for Zoom Video (Ticker: ZM). Once you are on the stock page, click the Chart link on the tool bar. When the chart pops up, I click on the Indicators link in the top left of the chart. That drop down has a series of items you can add. The three that I love are: (1) Moving Average set up for 50 days, (2) Bollinger Bands set up with 100 days and 2.75 standard deviation, and (3) ATR Trailing Stop set up for a period of 21 and 4 standard deviation.

The second step is pretty simple. I arrange my charts to show the last month of activity. And then I work through my list from Finviz. I search for the stock, click on the chart, and see if in the last 5 days it has popped above the Bollinger Band’s high price. As you can see for Zoom with the recent jump, it’s price has easily closed above the high Bollinger Band. I like Bollinger Bands because a breakout in stock price from the bands indicates that they overcame the volatility in price of the stock.

If the stock has passed the Finviz screen and closed higher than the Bollinger Band high price in the last 5 days then I set my portfolio up to purchase them at the open of the market on the next Monday. As a recap, here are the key items I look for in a trend/momentum stock:

  • Market Cap over $1B and under $50B
  • Average volume over 500K under
  • Stock Price over $5
  • Increase in price for the quarter of 30% or higher
  • 20-Day simple moving average above the 50-day simple moving average
  • New High price in the last 50 trading days
  • Close above the 2.75 standard deviation Bollinger Band high price

If you have any questions or think I can do something better, then leave a comment down below.

Updating the portfolio

Stocks sold this week:

  • Hitting a “sell indicator” (There are four: (1) ATR Trailing Stop, (2) 5wks/Less than 5% gain, (3) 10wks/Less than 10% gain, and (4) 20wks/Less than 20% gain)
    • Stagnant Sells:
      • N/A
    • ATR Stop Sells:
      • FLGT – Fulgent Genetics – Got destroyed on the news from Abbott Labs and their low cost Covid test and roll out in the coming months.
  • Increased Over 100% in Value (when this occurs we sell half and let the rest continue until it hits a “sell indicator”)
    • N/A
  • Biggest losers being replaced by new “buy indicator” stocks:
    • REGI – Renewable Energy Group
    • RVLV – Revolve Group
  • Unusual Activity Sell:
    • N/A

Ultimately, the stocks I sold this week will probably do well over time, but it just wasn’t their time in my portfolio. Noticed Renewable popping 15% today, which always tinges my mind with some self-doubt on my process, but then again portfolio performed very well today overall.

Stocks Purchased this week:

  • CSIQ – Canadian Solar
  • EAT – Brinker International
  • ELAN – Elanco Animal Health
  • PLAN – Anaplan Inc

I noticed on the screener this week that a lot of the restaurant stocks like EAT, BJRI, and BLMN were moving higher. Will be interesting to see if this trend continues next week. Picked up Brinker International this time, the owner of Chili’s and Maggiano’s.

Overview of the portfolio

And the swings continue. Down 3.27%. Tough week with the S&P 500 being driven higher for some crazy reason by the stock splits of Apple and Tesla. We will see how this next week goes.

Get Started Investing

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen

It actually has become more risky to invest keeping your money in savings accounts. Inflation slowly eats away at your purchasing power with those funds, and the interest rates they are offering at the moment as pitifully low. The stock market over any 20 year period in history has never lost money. You must invest!

You can at least get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What is the mindset needed to build and maintain a trend/momentum portfolio?

Episode 2: Building a trend/momentum portfolio

Fight Club on Paper

A few movies in the ’90s had some of the greatest film twists in history. The Sixth Sense. The Matrix. And especially Fight Club. Trend/Momentum investing reminds me of Fight Club. You had these two very distinct personalities going head to head in the movie. The conservative, timid narrator played by Edward Norton and the brash, flashy, and risk-taking Tyler Durden played by Brad Pitt (if you want to relive the 90s, check it out by clicking here).

The two characters battled it out in scene after scene until the big reveal at the end, which reminds me of trend/momentum investing. There is this flashy, risk-taking side. I am picking stocks with new highs, having already made a 30% move and hoping to catch a ride on the continued move up. This goes against every value investing book that I have ever read… Warren Buffet/Ben Graham and their cigarette butts… Peter Lynch and his buy things you know before other people begin to notice.

So every time a drop in the account occurs, my brain immediately flips to Edward Norton’s conservative/timid attitude. A ticker tape flashes across my mind’s screen stating “sell everything and just buy an index fund!” That battle rages on every week with the gains and losses, so I always need to step back and remember why I started in the first place. I need to remind myself of the process and steps I have put in place. I need to constantly remember the mentality needed to stay with my investments, even during challenging times.

Mentality Must Haves for Trend/Momentum:

  • In his book “One up on Wall Street“, Peter Lynch has the perfect summary of the mentality needed to own stocks. He states “the list of qualities ought to include patience, self-reliance, common sense, a tolerance for pain, open-mindedness, detachment, persistence, humility, flexibility, a willingness to do independent research, an equal willingness to admit to mistakes, and the ability to ignore general panic.” I couldn’t have said it better myself.
    • Patience – not everything will come immediately.
    • Self-reliance – do your own research and trust in your process.
    • Common sense – make sure 1+1 = 2.
    • A tolerance for pain – losing $500 in a week hurts. Get over it!
    • Open-mindedness – be willing to make changes when/if necessary.
    • Detachment – don’t look at your stocks 20 times a day, tracking every movement.
    • Persistence – keep at it!
    • Humility – you can’t always be right.
    • Flexibility – again, be willing to make changes.
    • A willingness to do independent research – read lots of books/articles and stay up to date on the latest news.
    • A equal willingness to admit mistakes – again, you can’t always be right.
    • The ability to ignore general panic – a broken clock is right twice a day.

Just last week my mentality was tested. I lost internet connection for three days, setting me back at work, in my investments, and with this weblog. It was frustrating, but I leaned on detachment, patience, and persistence to get me through and help me to remember that I am in this for the long haul. It also didn’t hurt to be rereading “One Up on Wall Street” and see that quote from Peter Lynch again.

Current Trend/Momentum Portfolio

I apologize but due to my lost internet connection last week, I won’t be able to update a screenshot of my current portfolio. I was able to track down my portfolio’s performance vs. the S&P 500, so I will add a screenshot of that shortly.

Stock Sales week of 8/14:

  • Hitting a “sell indicator” (There are four: (1) ATR Trailing Stop, (2) 5wks/Less than 5% gain, (3) 10wks/Less than 10% gain, and (4) 20wks/Less than 20% gain)
    • Stagnant Sells:
      • CYRX – Cryoport Inc. – After 5 weeks, CYRX was stagnant, not hitting the ATR Stop and not gaining at least 5%.
    • ATR Stop Sells:
      • JMIA – Jumia Technologies – What a wild ride. Up 25% on the first day. After 2 weeks, down 14%. Time to move on to another.
  • Increased Over 100% in Value (when this occurs we sell half and let the rest continue until it hits a “sell indicator”)
    • N/A
  • Biggest losers being replaced by new “buy indicator” stocks:
    • APD – Air Products
    • LRN – K12 Inc
    • NVAX – Novavax Inc
    • UCTT – Ultra Clean Holdings
    • INFY – Infosys Limited
    • AN – Autonation

Another week where the purchases dictate the sale of stocks. I have determined that if a stock has gained over 1% per week since its purchase, then I will not sell the stock. I also won’t sell a stock within one week of its purchase, letting it ride for a minimum of two weeks. This might put some pressure on my portfolio of 25 stocks coming up here shortly. Might need another market cap change or another tweak made to the process.

Stock Purchases week of 8/14:

  • EXPI – eXP World Holdings
  • FDX – FedEx Corporation
  • FLGT – Fulgent Genetics
  • RBA – Ritchie Bros. Auctioneers Inc
  • REGI – Renewable Energy Group
  • RVLV – Revolve Group
  • TDS – Telephone and Data Systems
  • UFS – Domtar Corporation

A full slate of stocks to purchase this week. A little healthcare, a little real estate, a little distribution, a little energy. Hmm… quite a unique mixture of stocks with no clear theme to the increases.

Stock Sales this week, 8/21:

  • Hitting a “sell indicator” (There are four: (1) ATR Trailing Stop, (2) 5wks/Less than 5% gain, (3) 10wks/Less than 10% gain, and (4) 20wks/Less than 20% gain)
    • Stagnant Sells:
      • N/A
    • ATR Stop Sells:
      • GSX – GSX Techedu Inc – Another high flying Chinese tech stock caught up in the macro challenges between the two superpowers.
  • Increased Over 100% in Value (when this occurs we sell half and let the rest continue until it hits a “sell indicator”)
    • N/A
  • Biggest losers being replaced by new “buy indicator” stocks:
    • N/A
  • Unusual Activity Sell:
    • SRNE – Sorrento Therapeutics – In the middle of the week, Sorrento terminated their CFO. As soon as that news was released, I sold the stock. It might rebound and do fine in the coming weeks, but one of my biggest red flags is sudden/inexplicable/shady changes in management.

It was a pretty light week in sales. The stocks as a whole performed well, increasing my overall portfolio by more than $560 and putting me back ahead of the S&P 500 for the year.

Stock Purchases this week, 8/21:

  • PACB – Pacific Biosciences

I wonder if this low amount of buy indicator stocks means that the market is becoming stagnant or on the decline. I did see volatility between my growth and dividend stock portfolios. One would be up and the other down, then the roles would reverse the next day. I love having those two rock solid portfolios that I just keep investing in. And I love having this trend portfolio that is based solely on the numbers and the process.

Overview of the Trend/Momentum Portfolio:

What a set of weeks! I experienced a range of emotions watching this portfolio. Glad my wife did not record my reactions like those YouTube videos of fans reacting to last minute losses (my screens are still intact). This is the world of investing. There are wild fluctuations in the market. But stick to your system. After losing <$484> for the week while the S&P 500 rose on the Tesla and Apple stock splits, I was questioning everything. Crazy to think how quickly your emotions can turn. I reined those emotions in, and had a strong second week, out pacing the S&P 500 easily and regaining my lead over the S&P 500. I went from -1.73% versus the S&P 500 two weeks ago to a 1.31% gain over the S&P 500 last week.

Warren buffet on systems

Benjamin Graham stated “the market is a voting machine in the short term and a weighing machine in the long term.” I need to remember that I am picking up stocks that have been voted on positively in the short term, and through my process over the years, they will be weighed. Cannot deviate from the system.

You can at least get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Stick to your system!!!

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What to do with extra funds for a dividend portfolio?

Episode 2: Growing a Dividend Portfolio

Every $1K

Currently my dividend portfolio earns 4% in dividends every year. That means that for every $1,000 invested in the portfolio, those companies in my portfolio will pay me $40 each year just for owning their stocks. My mindset going into this is pretty simple… every $1,000 invested will pay one cell phone payment every year for the rest of my life. From here on out, I only have to pay 11 of the 12 payments each year because that $1,000 invested will take care of the last payment for me. After $12,000 is invested, I will have my cell phone payments covered for the rest of my life.

And then I just keep going down my list of expenses… electric bill, water bill, car insurance, rent, etc., until one day my dividend account covers each of my expenses. That’s the ultimate goal. By growing it to that level, I will have hit my retire-able net worth. And if I can accomplish that for my family, then we can have the freedom to work or not work. Volunteer. Enjoy passion projects. Travel. And so much more.

Decision on extra money

Our dividend portfolio is currently built on a biweekly amount transferred into the account. I then have a process to purchase dividend stocks across a range of industries. But recently we received an extra $1000 refund from one of our wedding vendors, which was outside the normal process. So I decided that I would split the amount evenly between all of the companies and ETFs that had a dividend percent over 4%. This led to extra shares purchased for 11 companies in our dividend portfolio. Using Fidelity, I was able to purchase partial shares for no commission, thus being able to spread out the $1000 among 11 companies without any high costs.

Overview of Dividend Portfolio

Stocks purchased with extra funds:

  • T – AT&T Inc – 6.95%
  • PEAK – Healthpeak Properties – 5.40%
  • IDV – iShares International Dividend ETF – 5.37%
  • IBM – IBM Corporation – 5.21%
  • ABBV – AbbVie Inc – 4.99%
  • PFG – Principal Financial Group – 4.99%
  • SPHD – Invesco S&P 500 High Dividend Low Volatility – 4.72%
  • O – Realty Income Corp – 4.56%
  • USB – US Bancorp – 4.50%
  • VZ – Verizon Communications – 4.20%
  • SPYD – SPDR S&P 500 High Dividend – 5.31%

Performance versus S&P 500:

Our cell phone bill is now covered for three quarters of the year for the rest of our lives πŸ™‚ We are also beating the S&P 500 earned dividend revenue by $379, but losing to the gains in the portfolio by -2.28%. It was also nice to see the portfolio dividend % pop back up to 4% from the previous week, which melds well with the 4% rule for retirement.

Stock Quote

“The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row.” -Peter Lynch

A company paying dividends that they consistently grow over time usually (I key in on usually because companies do misstep and cut/eliminate their dividend) means they are strong and profitable. These aspects are good to have in an investment. But largely, our dividend portfolio offers versatility in two key respects:

  1. For the time being, I can reinvest those dividends back into more investments that will also grow over time.
  2. And when we are ready to retire, we can use those dividends to pay for our expenses throughout the year.

You can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What are dividends?

Episode 1: Growing a Dividend Portfolio

Thank you Alexander Hamilton!

I am not throwin' away my shot
I am not throwin' away my shot
Hey yo, I'm just like my country
I'm young, scrappy and hungry
And I'm not throwin' away my shot.

-My Shot from Hamilton

Just finished watching Hamilton on Disney+! If you haven’t already, subscribe to Disney+ and watch it. Just amazing! Alexander Hamilton is the founder of our current financial system. Crazy to think that one man could help start something that would become this powerful across the world… the platform that allows companies like Apple, Amazon, Microsoft, Disney and many others to succeed.

The show really encouraged me to read the book Hamilton by Ron Chernow… and then I saw that it was a hefty 818 pages. It might have to be weekend read for me πŸ™‚

Alexander Hamilton believed that a central US bank could help provide liquid capital to spur commerce and build the US into a commercial powerhouse (quite the insight). And we see this at work with the Covid-19 crisis shuttering businesses and hindering economic growth. The Federal Reserve has stepped in and infused capital into the markets and businesses to try to bridge the gap to profitability. Whether or not it is enough has yet to be seen, but the ultimate goal of a business is to become profitable, or remain profitable, even in this volatile time period.

What are dividends?

Profitability is simply the remainder of money a business has left over after all of the expenses, interest, and taxes are paid. That business, if profitable, then has two choices: (1) the business can use the extra funds to spur future growth, or (2) the business can give the owners an extra payday by sharing the profits with them. The business can also combine these two aspects and get the best of both worlds.

Most businesses that look to grow rapidly or find themselves in a highly competitive market will take the profits and reinvest 100% of them back into the business. Other companies will use a portion of those profits for growth and a portion given out to the owners as a form of payment called a dividend. And then there are some companies that are required to pay out 90% of their profits as dividends (see REITs).

So simply put, dividends are a payment from the profits of a business to its owners (or for publicly traded companies like Disney or Microsoft they are called shareholders since they own shares of the company called stocks).

Typically, dividends are paid out quarterly (every three months) to the shareholders for each share of stock they own. As of 8/9/20, Microsoft (Ticker: MSFT) will pay a $0.51 dividend each quarter for each share of stock someone owns. If I own 100 shares of Microsoft, then each quarter they will pay me $51. And each year they will pay me $204, just for being an owner of 100 shares of their stock. Combined with Microsoft’s potential stock price increases over time, this is the Muhammad Ali 1-2 combo that led me to create a dividend portfolio.

Keys to our Dividend portfolio:

  • The Dividend Portfolio is located in a taxable brokerage account. This is the portfolio that Lizette and I will live off prior to hitting the age of 59.5 when we can tap into our retirement accounts.
  • Every two weeks we deposit money into the account, using 50% of the funds to purchase specific high dividend ETFs (exchange traded funds or an investment fund bought/sold on the stock exchanges that holds multiple stocks within the fund) and 50% of the funds to purchase high dividend yield stocks of publicly traded companies.
  • There is no limit on the number of dividend stocks in the portfolio, but each stock in the portfolio is required to have strong leadership and employee satisfaction, pathways to growth, a growing dividend, a consistently high dividend payout to shareholders, and the ability to make the dividend payment in good times and bad (like our current situation).
  • The only time a sale would occur is: (1) if the stock stopped paying a dividend (something that has me hesitating to buy Disney for this portfolio at the moment because they have stopped their dividend due to the challenges of Covid-19), (2) if there are no more pathways to growth over time, or (3) if another company/ETF is believed to be a stronger replacement.

Our Current Dividend Portfolio

Stocks purchased this week:

  • Stocks:
    • JPM – JP Morgan Chase
    • HAS – Hasbro Inc
    • EXR – Extra Space Storage
  • ETFs:
    • IDV – iShares International Select Dividend
    • SPHD – Invesco S&P 500 High Dividend Low Volatility
    • SPYD – SPDR S&P 500 High Dividend
    • VTI – Vanguard Total Stock Market Index

Stocks Sold this week:

None this week.

Overview of the Dividend portfolio

The ultimate goal of this portfolio is to make more dividends from the portfolio than we would have if we had just invested in an S&P 500 index fund or ETF. A secondary goal would be to also outperform the S&P 500. We are easily beating the S&P 500 in the yearly payout of dividends, currently by almost $347 per year. Although we are losing to the S&P 500’s gains by -2.63%. Regardless, the account is still performing better than if it was placed in a savings account, and it is returning 3.94% per year in dividends. No savings account gives me that type of interest right now.

Nothing compares to a crayon drawing:

Do not purchase a stock that you cannot explain with a crayon drawing (from one of my must read investing books, Beating the Street by Peter Lynch).

If you have any initial questions, then leave them down below in the comments section and I will do my best to answer them for you.

At the least, you can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What is net worth?

Episode 1: Tracking Net Worth 7/1/20

How much does construction suck!?

For the last year and a half of living in our house, Lizette and I have been subjected to the pains of construction in our backyard. Clearing the brush, outlining the foundation, pouring the foundation, and building a metal structure to support the unique design cover the extent of their work. That’s it! Another house down the street started construction six months ago and is already near the finish line.

As annoying, and slow, and painful as it can be, they work to build a house potentially shown in magazines and represented as one of the best home designs in the ATX. Building an award winning house takes time, careful planning, hard work, patience, and so much more.

Building our net worth requires the same mentality. The process of getting to a retire-able net worth will be frustrating. We will experience setbacks and doubt our decisions. But if we can understand that it takes time, careful planning, hard work, and patience, then the possibility of an eight year goal to retire is achievable.

What is net worth?

If you decided today, I’m going to sell everything I own and pay off all of my debts, what amount would you be left with after the dust settles? Would that number be positive or negative? In essence, that is your net worth, or the total amount of assets you own less the debts you owe.

AssetsDebts
$ Value of Savings Accounts$ Value of Credit Cards
$ Value of Checking Accounts$ Value of Car Loans
$ Value of Investment Accounts$ Value of Home Mortgage
$ Value of Retirement Accounts$ Value of Student Loans
Resale Value of Heirlooms, Jewelry, Collectibles$ Value of Other Debts
Conservative Estimate of Home Value
Sum the above assets = Total AssetsSum the above debts = Total Debts

Calculate your net worth with the following formula after completing the chart above:

  • Net Worth = Total Assets – Total Debts

Don’t be discouraged if your number is negative. I had a negative net worth in 2017 after a banner year in 2016 when I racked up student debt and had a total income for the year of $25K. Lizette’s net worth was also negative after having accumulated $150K in student debt. The true test will be the decisions you make after identifying your negative net worth because that is where the hard work and sacrifice will come into play.

Our Net Worth on 7/1/20

AssetsDebts
Savings – $67,096Mortgage – $350,520
Checking – $32,581
Investment Accounts – $96,603
Retirement Accounts – $114,493
Home Estimate – $502,000
Total Assets = $812,772Total Debts = $350,520

Net Worth = Total Assets – Total Debts = $812,772 – $350,520 = $462,252

Lizette and I have started to touch base on our net worth every two months. We pull our numbers, fill out an excel sheet and calculate the increases/decreases. We have set our retirement net worth goal at $2.5MM (using the famed 4% Rule which will be discussed in future posts, but if you want to get ahead then you can read this Investopedia overview). So currently we are approximately 18.5% of the way there!

Also of note, we don’t include furniture, electronics, cars, or other collectibles we own in our net worth total. The cars lose their value over time, as do electronics, so they are nixed from our calculations. And collectibles are just that, collectibles, and not something to be sold (unless you are an expert in art or jewelry and have bought those pieces as investments to be sold later). And finally furniture is something we will need in the future regardless of our situation.

On the other end, I do include our house in the net worth because we will have the option to sell the house and reap the profits (up to $500K of which would be tax free) or rent the house out and enjoy the extra cash flow. We are also looking to have it paid off in the next eight years, so we could just live in it and lower our expenses (thus lowering our net worth goal since it is based off of expenses).

We calculated our first net worth together on 5/1/20, and overall our net worth increased 10.4% over two months. Ahh the power of the stock market. Who knows how it will react in the near future, but it was crazy to experience the fastest drop in history and then the largest increase in one month in history. My specific net worth increased 23.3% and Lizette’s increased 8.9% (solely due to the fact that my net worth was/is quite a bit smaller than Lizette’s net worth, so the money I save will have a greater impact on the % increases).

How we got here:

Lizette and I have had our bumps but we have stuck to a few key principles over the last couple years that have put us in our current position and have us challenging ourselves to retire in eight years.

  1. Spend less than 50% of what you make
  2. Don’t pay for new vehicles
  3. Cook at home and cook healthy as much as possible
  4. Keep track of a budget
  5. Ignore the whims of the market and just keep investing
  6. Plan ahead for potential changes in finances like having a child, moving, switching jobs etc.
  7. Prioritize our needs and wants so when a decision needs to be made we look back on our ordered priorities to make that decision
  8. Talk openly and periodically about our finances and financial goals – No secrets, no jealousy (Check out this video from one of my favorite YouTuber couples “Our Rich Journey” about financial discussions)

Your money can also be your employees:

“It’s not hard. Stop thinking about what your money can buy. Start thinking about what your money can earn. And then think about what the money it earns can earn.” – JL Collins from The Simple Path to Wealth

While we work during the day, our money invested is also hard at work for us. Every dollar we invest is our employee. And everyday it wakes up at 9:30am est/ 8:30am cst and goes to work to grow wealth for us. We just need to help guide it to the right investments, where more often than not it has a good year (2 out of every 3 years). JL Collins has written a masterclass on basic investing in his book The Simple Path to Wealth. Get a copy by clicking here! You won’t be disappointed.

You can at least get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Make sure to invest in what you know. Don’t take a hot stock tip from a friend or neighbor. Stick to the basics and do your research. From 2010 to 2020, the two most profitable stocks for investors if you held them for the 10 years are two pretty well known companies: Netflix with a 4,011% return and Domino’s Pizza with a 3,989% return (thank you Motley Fool for compiling the list).

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What is trend/momentum investing?

Episode 1: Building a trend/momentum portfolio

Back at this Blogging Thing again!

Whelp! I am back at it again. Haha. I believe this is attempt number ten at starting a blog. I am the Thomas Edison of blogging. Fail enough until you succeed… right? At least in Edison’s case it took one thousand times before the light bulb succeeded in emitting light. So I have a few more tries to go before I get to his level.

Luckily each failed attempt teaches me something… make the blog for yourself, don’t pigeonhole yourself into one small category, create value for those taking the time out of their day to read your posts, and make it personal. Not only that, but I feel like this blog can also be an accountability partner for myself and my amazing and badass wife, Lizette.

About four months ago, I estimated that we could potentially hit a net worth that would allow us to retire comfortably in eight years (more on these calculations to come). Yeah, we were a bit surprised too. And therein lies the challenge we have set out for ourselves…retire in eight years or less.

But we have to make sure that we continue to have fun and live a rich life while we do it. She and I have worked to minimize our expenses and continue to push each other professionally in order to maximize our incoming revenue. And since any talks longer than 15 minutes with my wife on our finances/investing are not advised in our relationship, then the true test is on my shoulders.

The question I ask myself is simply, can I maximize the returns from our savings with different investment vehicles?

Love me some Calvin and Hobbes. Calvin, the quintessential hustler! Goals!
Get his entire works by clicking here!

Our investment vehicles currently consist of the following:

  1. Our house -> Average housing prices rise 5% per year
  2. Index Fund Portfolio -> The total stock market index has risen 11% per year for 40 years.
  3. Trend/Momentum Portfolio -> 7.65% gains after starting it at the beginning of July.
  4. Dividend Portfolio -> Producing $651 per year in dividends as of 8/7/20.
  5. Growth Portfolio -> Outpacing the S&P 500 by 27% since November 2019
  6. High Interest Savings Account -> Earning 0.8% interest per year at the moment (was 2.1% prior to Covid)

By diversifying into different avenues, I am lowering our overall risk while still betting on the US economy over the long term. I heard you, Warren Buffett, loud and clear. Your billions don’t have to tell me twice. Thank you to JL Collins as well! And Peter Lynch!

The Trend/Momentum Portfolio is updated every week, the Dividend Portfolio every two weeks, and the Growth Portfolio every month, so I will share updates here. Our house, the Index Fund Portfolio, and the High Interest Savings Account are set-it-and-forget-it investment vehicles, so they will be included in a bi-monthly update on our net worth.

What is Trend/Momentum Investing?

The Trend/Momentum Portfolio is something I have pieced together over the last year and finally put into place at the beginning of July 2020. It gets rid of all of the noise of the stock market and focuses on some key indicators (will be explained in future posts) that identify an upward trajectory of a stock’s price. The indicators also work for my personality and investing temperament. In my research and reading, a trend/momentum stock is like lassoing a rocket that has just taken off. The price movements of the stock will let me know if it is doing well or if I need to sell the stock and move to another.

Keys to our Trend/Momentum Portfolio:

  • The portfolio is housed in a tax advantaged retirement account, meaning that the capital gains (any profit we make on the sale of the stock) are not taxed year in and year out. This allows me to buy and sell stocks while not worrying about the potential tax implications.
  • An initial screening system was created to identify the stocks to buy each week, along with a system to track how the stocks perform and if I need to sell any stocks.
  • I stick to the system as best as I can. I have only deviated slightly as I get more experience working with the system and try to make small adjustments to manage the portfolio. I am looking to lock in all of my steps in the coming months and then continue that process moving forward.
  • I recalculate everything on Friday, submit the stocks for sale and purchase on Monday morning, and then I have fun tracking their ups and downs on an excel sheet and with Finviz throughout the week.
  • I have currently set the max number of stocks to purchase in the portfolio at 25.

Our current Trend/Momentum Portfolio

Stock sales this past week:

  • Hitting a “sell indicator” (There are four: (1) ATR Trailing Stop, (2) 5wks/Less than 5% gain, (3) 10wks/Less than 10% gain, and (4) 20wks/Less than 20% gain)
    • N/A
  • Under $1B or Over $100B in Market Capitalization (a tweak to the rules explained further down):
    • TSLA – Tesla Inc
    • TSM – Taiwan Semiconductor
    • NFLX – Netflix Inc
    • WRTC – Wrap Technologies
    • ICLK – iClick Interactive
    • RVP – Retractable Technologies
  • Increased Over 100% in Value (when this occurs we sell half and let the rest continue until it hits a “sell indicator”)
    • OSTK – Overstock.com – Currently up 111% since I purchased it on 7/13
  • Biggest losers being replaced by new “buy indicator” stocks:
    • OCFT – OneConnect Financial Technologies
    • SOHU – Sohu.com
    • NIO – Nio Inc.

Many of the stocks (ICLK, OCFT, SOHU, and NIO) being replaced this week hail from China. With the uncertainty over the China/US relations and the conflict brought about by Microsoft’s potential TikTok purchase, the Chinese stocks owned in this portfolio have seen a downward trend in their price. This is one of the reasons I like this style of portfolio. When the downward trend starts occurring, I start selling. If relations improve, then I will see those stock prices moving upward and begin to purchase them for the portfolio.

Purchases this past week:

  • AES – AES Corp
  • APPS – Digital Turbine Inc
  • CELH – Celsius Holdings
  • GSX – GSX Techedu
  • HOME – At Home Group
  • MOS – Mosaic Group
  • PBI – Pitney Bowes Inc
  • SRNE – Sorrento Therapeutics
  • SYNA – Synaptics Inc

The portfolio was tweaked slightly this past week to accommodate for the stocks that passed the initial screen test to purchase. With nine companies passing, this more than maxed out the stock portfolio limit of 25 total stocks. So for our Trend/Momentum Portfolio, I will no longer purchase stocks of companies that have a market capitalization (the dollar value of all the stocks of the company) under $1B or above $100B. This will help me manage the portfolio better over the long run.

Overview of the Trend/Momentum Portfolio:

The ultimate goal of this portfolio is to out pace the S&P 500 year in and year out. Since inception (which by no means proves anything as of yet), the Trend/Momentum Portfolio has outperformed the S&P 500 by 2.31%.

Getting Started Investing:

With terms like trend/momentum, growth, dividend, market capitalization, portfolio, high interest savings account, tax advantaged retirement account, and more, I’m sure it is a lot to absorb if you are new to investing. My goal is to make these posts a 15-minute or less read (see the note about finance/investing conversations with my wife above). So these terms and more will be covered on future posts as I continue over the years, but if you have any initial questions, then leave them down below in the comments section and I will do my best to answer them for you.

At the least, you can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

And if you choose to get started investing right away, then take a moment to listen to the Motley Fools Investing Dos and Don’ts, or you can read the transcript. Building a Trend/Momentum Portfolio takes some time and understanding, so I would start with the simple initial steps of buying a stock or index fund.

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.