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Thursday, September 22, 2016

System 12. Portfolio Initiation

Before attempting to follow the steps of this article, make sure to READ these:
Part 1: System 12. American MegaDozen. Introduction.
Part 2: System 12. Portfolio Construction and Rules 
Part 3: System 12. Trade Management 
Part 4: System 12. Performance and Risk
-reading part 5:  System 12. Portfolio Initiation-
and remember that you are responsible for your own decisions with your own money (tips hat)

Whether System12 is started during some kind of market correction and shows high profit from the get go, or all the buying is finished just before bottom drops out and sharp losses occur - System Start is highly unpredictable. I found it very hard to forecast which one of scenarios is more likely to transpire, so it's always better to consider different outcomes and ... carry a cash reserve.

System 12 is not an "Always ON" kind of portfolio, it doesn't have to be fully invested all the time. In fact, there are periods when S12 is fully or partially in cash, as explained in 'Performance and Risk'. Naturally, these are the best conditions to start investing into Mega Dozen (MD) stocks, just as they emerge from a correction or a bear market. These periods do happen every so often, but being impossible to predict, they have to be observed in real time.

Practically, there are only two ways to Start a System - you buy them all at once, or you don't. :)
There is no other way - you just have to bite a bullet here. See, most of these stocks have been in MD and SD for years, they were good to buy before and will remain so indefinitely into the future. This system was designed to get money invested into them, so just do it! Don't worry if some look extended in their advance - they may go even higher. Don't fret about some that seems to be in correction - there is a 'stop' for that. Just do what system rules tell you to do, but first - put a buy order just above last high of a day or two ago. $3000 per position will do, in accordance with S12 Requirements (post link).

(-NOTE- I keep the following original text for illustration purposes. The 'Investopedia' simulator proved to be inaccurate and was abandoned. In November 2016 I started new simulation on MarketWatch that expected to run for about a year and then rolled forward for continuity:
System 12 LINK: www.marketwatch.com/game/system-12)

This is exactly what I did on August 23 of this year, by buying all Qualified and Available stocks from Mega Dozen (MD) and about half way into Second Dozen (SD) (see 'Portfolio Construction' article) into a simulated account at Investopedia, that will be accessible there for review and comparison. Note: they don't have an option to set-up a 40K account, so I took next one up ($50,000). Remember to always adjust it by 10K. I will keep my own records to make sure of that.
WMT was never triggered, instead V was bought on Sept 2.
GE and PFE were stopped out on Sep 9, MRK was bought on Sep 15.
As of this writing, S12 Portfolio has 11 positions on, with buy stop order set for WMT and sell stop set for CVX. Notice that account value stands a bit over 50K, and realize that recent market rout (when SPX corrected by about 3%) left System 12 completely unimpressed. Portfolio was down about $500 at the lows, which is nothing.
While there are some differences between this simulated account and real world, I want to make an important suggestion: don't go betting tens of thousand of your hard-earned money on some guy's say-so. Study this series of articles carefully, set-up a virtual account and start keeping your own records and notes. Follow my updates and ask questions. Don't rush. You have to give yourself enough time to get familiar with the system, establish a routine for its management, as well as to see what kind of mistakes you are making and what needs to be done about it. While all this going on, you should be waiting for a draw-down in portfolio or some panic in a market - the perfect time for System Start. Then you go about it just as practiced in virtual account, with experience gained from simulation and calm disposition learned from practicing portfolio management.

I put all orders, by-pass elections and explanations on this private Twitter feed (just send me a request - its FREE for now): https://twitter.com/SWID_iBergamot

.Programming note:
.all articles and updates about this strategy are accessible by selecting label 'System12' on right sidebar.

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