Paper Trading Portfolio Blogs
October 2020 - Current
In order to develop market analysis skills and eventually invest on behalf of clients, I wanted to invest in the market with my own capital. ThinkorSwim developed by TDAmeritrade allows me to invest virtual virtual cash into a variety of investment vehicles.
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Starting Capital: $200,000
Week 1
11/09Â - 11/13
Risk. In any investment you make within the stock market, there is an underlying risk associated with it. However, the key to minimizing risk is the diversification of capital among different instruments, and different sectors of the market. This week's goal was primarily focused on finding a good balance between my risk tolerance and my goals. Given that the papertrading simulation ThinkorSwim does not allow me to invest in mutual funds or buy bonds, I am limited to stocks and ETFs. As of 11/13/2020, here are the current allocations:
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Information Technology: 17.36%
Health Care: 14.14%
Consumer Discretionary: 11.21%
Communication Service: 11.03%
Financials: 10.19%
Industrials: 8.62%
Consumer Staples: 6.92%
Utilities: 3.09%
Materials: 2.66%
Real Estate: 2.62%
Energy: 2.16%
Cash: 10%
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As of today, these are merely allocations that I found on a broker website known as Fidelity. These allocations are subject to change.
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Weeks 2-3
11/13Â - 12/04
In these 2 weeks, I spent one week further planning the outline of my portfolio and began the actual investment process which including placing orders on all of the shares I wanted.
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I spent the beginning of the week researching different types of portfolios and decided that I wanted my portfolio to be on the middle of the passive-aggressive spectrum for two main reasons. the first being that I wanted to let my investments "steep" and grow in the long run while producing guaranteed income. Secondly, I wanted to mimic how I would actually invest in the real market. I knew that I would not be as risky if it were the real market and as a result I wanted to mimic real situations. I decided that I would invest about $150,000 of my total capital towards long term investing and invest about 70% that amount toward blue chip stocks and hold in order to collect dividends. The other 30% would go towards ETFs. Lastly, the $50,000 remaining would be allocated toward riskier swing trading and momentum trading to minimize risk.
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In the second week, I invested in stocks such as Amazon, Alphabet, Microsoft, Bristol-Myers Squibb, and Apple which are well-established companies that have shown signs of growth in the long run. These will solidify by portfolio in the long run and ensure that I do not lose capital.
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Weeks 4-5
12/07Â - 12/18
These two weeks were dedicated to investing the other 30% of my portfolio in ETFs. My reasoning was based on the fact that ETFs provide diversification in it of itself and show signs growth in the long term. I spent the first week as usual conducting market research on which ETFs were predicted to perform well in 2021 and saw that the SPY ETF was reliable regardless.
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With current growth rates, investing in the SPY ETF overtime has been proven and backtested to be a great strategy. However, pouring all my capital into one ETF seemed like an unwise decision. As a result, I found the Vanguard Growth ETF, which contains about 260 stocks with around 70 billion AOM (Assets Under Management). This ETF constantly filters companies on Wallstreet by growth metrics and contains megacap stocks that are reliable and liquid.
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After decided on the ETFs I would be investing in, I also realized that my allocation was not as safe as I wanted it to be. I wanted my portfolio to contain around 10-20% liquid cash and I failed to take this failsafe into account. As a result, I updated by allocation by taking some of my ETF allocation and keeping that capital in cash form.
Weeks 6-7
12/21Â - 01/01
These 2 weeks were much more hectic with regards to my portfolio, but also included less actual research and more hands on learning. I let my $130,000 "steep" in the market while also learned some quick strategies to swing trade and look at stocks in a technical aspect. I learned 2 main strategies and practiced them by backtesting them on other stocks throughout the years.
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The first indicator or strategy I used is the RSI model. This indicator I saw was useful for swingtrading because it provided a rating between 0-100 of how overbought or oversold a stock was. If a stock is heavily overbought, it tends to be bearish and if a stock is heavily oversold, it will follow-suit by trending upwards. I simply used RSI models and applied them to stocks such as Apple in previous months and sure enough, the model proved itself to be true in most cases.
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While an indicator is certainly useful in trading, it is crucial to have more than one to complete the setup. If a stock meets the criteria for both technical indicators, it has a high chance of trending the way it is predicted to. This second week, I found that Exponential Moving Averages (EMAs) were easy to use in my trading. If a short term EMA is about the cross a Long term EMA line, the share price tends to rise. With these two strategies, I plan to officially start swing trading with small amounts of paper capital.
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Weeks 8-9
01/04Â - 01/15
With the new year finally approaching and election season in full-swing, the market was extremely volatile, meaning that it fluctuated heavily. However, as an investor, I took advantage by performing some political research and also trading at the same time.
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The stock market is guaranteed to veer towards certain companies depending on which candidate wins the election. Based on the standings, Joe Biden seems to be confirmed as president as as a result it was crucial to see which companies were likely to benefit as a result of his inauguration as a President.
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Therefore, I spent these two weeks actively trading renewable energy companies and infrastructure building companies such as Eaton, Brookfield Renewable Partners, Tesla, and First Solar. These stocks allowed my portfolio value to grow by about 6% in two weeks however, I kept emotion and excitement out of my head as much as possible.
Weeks 10-11
01/18Â - 01/29
In these two weeks, I collected some dividends from shares I held previously, opened up a REAL brokerage account and actively traded the stocks that would benefit from a Democratic Party victory.
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I sold some days into the announcement in order to ride the momentum and sell as high as possible. The main purpose for this early sell off was to ensure that I did not become to greedy for a profit and sell at a dip.
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Additionally, I was able to take part in an historical event being the hedgefund crisis about Gamestop. Essentially, a short squeeze of the stock of the GameStop and other securities took place, causing major financial consequences for certain hedge funds and large losses for short sellers. While I did invest in this fad, I made a quick exit because there were no true fundamentals behind this event and I expected government intrusion into the incident.
Weeks 12-13
02/01 - 02/12
I spent these two weeks actually crafting my real investment portfolio due to the fact that I was actually 18. I utilized this time to let my paper trading portfolio grow naturally and simply see what direction my investments would go without active intrusion.
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While my starting capital in this new account was significantly lower, I applied the same principles as my paper trading account. I controlled the personal feelings and chose to remain simple, only investing in ETFs and dollar cost averaging every month so that way I would grow my investment and on average, not loose any capital as the name of the strategy suggests.
This would allow me to maintain discipline and not veer off my investing principles, not making risky investments just to be greedy. I am so far only involved in the S&P 500 ETF (SPY) but overtime, I will add more to this list
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Weeks 14-15
02/15Â - 02/26
Due to a snowstorm in my town, I was not able to access internet or trade for the first 1 and a half week. It was a good time to perform some offline research by reading books on the fundamentals and learn about the numbers. Many companies release financials in the Spring so it is a great time to learn how to read ratios and see the story behind the numbers.
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I brushed up on how to read PE ratios, analyze revenue increased, Debt to Assets Ratios, and EPS.