August 31, 2007

I think it’s important to start with a basic strategy for my investment portfolio. If this were a real-life situation, the goal would be simpler -- to maximize gain while minimizing risk. In the case of this assignment, there is no risk. There are no consequences for an investment losing value, other than it would give me less fake money to “play” with. To that end, I am going to set my primary goal of this portfolio as being to learn as much as possible about the consequences of different short-term investment strategies.

My secondary goal is to increase the value of this portfolio as much as possible. While I don’t get any real benefit, or even a higher grade for earning more, I would be able to take a certain amount of personal pride, should I manage to beat the markets. To that end, I have noted level of three major indices at the close of market yesterday, and the number of “shares” 100,000 would have purchased at that time. I’l use this as my baseline comparison.

Finally, since this is an experiment in short-term investments -- the project only lasts until the end of November -- I will play around with much riskier investments than I would normally consider. While option trading and penny stocks are expressly forbidden by the assignment, and we are limited to only the Nasdaq and NYSE, I might try timing purchases to take advantage of IPOs, dividend payments or maybe even see if I can play some arbitrage games.

As one of those experiments, I am going to play the “invest with your head, not your heart” game. As part of my “starting five”, I own two “evil” oil companies, Chevron (CVX) and Exxon (XOM). While my personal politics may, or may not agree with the social aspects of such companies, I consider them smart investments. As a counterpoint, I am going to pick up $10,000 of PowerShare’s WilderHill Clean Energy Portfolio (PBW), which is a managed fund of “companies that focus on greener and generally renewable sources of energy and technologies that facilitate cleaner energy.”

Action	Symbol	Amount	Price	Extended Value
BUY	PBW	472	21.17	9992.24
Cash remaining				40046.63

I will also be keeping track of my portfolio using CNNMoney’s free portfolio tracking service.

The “Cash” in my account is assumed to default to being in a money market fund, yielding about 4% APY, which would be standard for an investment account. I’ll figure out my interest return on my “loose” cash at the end of the experiment.