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Smart Portfolio Management – The $25,000 Portfolio

Options Sage submits: “ Never risk what you do have and do need on what you don’t have and don’t need ” Smart portfolio management is a world apart from conventional portfolio management.   While conventional portfolio management offers generic guidelines to diversify capital, smart portfolio management is tailored to your personal circumstances.   We have, in the past had similar articles on managing $10,000 , $100,000 and $1M Portfolios .  This article is a variation of the $10,000 article in preparation for our new 2011 Member Portfolio with the goal of turning $25,000 in into $100,000 over the next 12 months.  Phil is, of course, proposing an aggressive stance but, after turning $10,000 into over $30,000 in just 7 months in the prior virtual portfolio – let’s just say we are confident it can be done .   Although this article focuses on prudent strategies for a $25K portfolio, many less conservative investors are likely to find   the strategies addressed throughout suitable for their own portfolios – though the % allocations will differ as we will see in Phil’s virtual exercise .    N o matter what your risk tolerance, a portfolio comprising some relatively conservative trades is always prudent! $25,000 Portfolio Phil once commented that, when trading a $10,000 portfolio, “every $100 counts”!   Capital should be allocated judiciously in a small portfolio.   NEVER allocate a majority of your capital to any single trade.   Dedicating 20% of your portfolio to relatively conservative trades (shown below) is appropriate but exceeding 30% is far too risky when dealing with limited capital.  With a $25K portfolio, it becomes increasingly imperative to be right first time.   Financial constraints limit your ability to scale into trades at different threshold levels and that makes timing critical unless…. Unless you figure out how to trade without requiring perfect timing of the market!   Those of you trading along with Phil’s earnings spreads have already seen some of the ways we take advantage of stock movement, whether they go up, stay flat or even drop to some degree… Strategy A:   The Covered Call – With a Twist – Making 44% in Just 13 Weeks Instead of placing the short call out-of-the-money in the conventional format, the short call is actually placed in-the-money .    C closed on Friday at $4.89.   Since the C has just tested the 50 dma,…
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