Launching My Model Portfolio Starting Today

I have posted stock trading tutorials in this blog, as well as advocated the combination of both fundamental and technical analysis for consistent outperformance. What good is theory when you can't put it to action? This is why I am launching a model portfolio in this blog. I will use Invetopedia.com as my portfolio tracker, with an initial virtual capital of $100,000. I can go long, short and I can use options. My benchmark will be the S&P 500 index, and my desired return is 3% per month or 36% annual return.


I will use various trading styles and strategies (scalping, range trading, momentum trading, buying/shorting on pullbacks/rallies) to achieve the desired returns. I will also use a focus list which will provide the candidates for my long positions, while I will mainly use ETFs or options for my short positions. No margin is allowed. Also, any specific position (whether long or short) cannot exceed 25% of the total portfolio, while a 5% rule applies for options. The portfolio is allowed to raise cash up to 100%, but for no more than 2 trading days.

With regards to the focus list for long positions, I have chosen stocks based on fundamental themes/megatrends. I believe you can make money out of a certain stock multiple times in a given time frame, and there is no need for an expanded list of potential stock candidates, thus the focus list will be limited to a maximum of 100 stocks. I will update the composition of the focus list as I see fit, and I will publish updates of this list.

I hope by launching this virtual portfolio, as well as updates and posts on my thought process for specific trades, readers can learn the actual analysis and execution in implementing profitable stock trading strategies.

The virtual portfolio will start tonight, the 30th of September 2009. I have already built the initial focus list comprised of 36 stocks. The themes/megatrends and their respective stock compositions are listed below. I will time the stocks from this list technically, with holding period of as short as intraday to 2 weeks.

Cleantech/Green Energy/Energy Efficiency - Despite tighter financing conditions, green energy and energy efficiency are still in a secular demand phase characterized by strong support domestically from the current Obama administration, as well as the global need to limit emissions amidst industrialization of emerging economies.
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Emerging Markets Play - Namely China and Brazil, where economies have bounced back sharply after last year's global slowdown; where demographics and fiscal conditions are ripe for further upside in growth estimates; also a play on the long-term weakness of the US dollar
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Technology - Who can ignore the strength of the the techonology sector, with secular growth stories, exposure to global demand and strong balance sheets?
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Gold - Inflation, while not a concern in the short term, is a sure hit longer-term, a must for every portfolio
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Infrastructure plays - Government spending will take over consumer spending and will drastically change the US growth profile for years to come, there is no other way to foster an economic recovery; with all the money pouring into the sector, the next bubble will be in infrastructure. Count on it.
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Private equity - Yes, financing is still tight for deals, but the M&A and IPO markets are seemingly coming to life; private equity groups have healthy balance sheets in general, and are highly leveraged to any recovery in asset prices
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Wish me luck!!!