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If you've
followed my last four articles to date, then you know how
to set up a Performance Yahoo! Watch Portfolio. You also know
now what some of those mysterious portfolio terms mean. Although
I need to cover some other terms with you, I believe that
at this point it's more important that you begin to see how
your investment strategy will work with monthly deposits into
your BUYandHOLD account. So I'll put that discussion off a
bit and get you started on your transaction portfolio.
This step
is time consuming, but it's the quickest way for you to learn
how to use dollar cost averaging. So set aside an hour or
two to gather information about two stock choices and to learn
how to use your new transaction portfolio (instructions to
follow).
First,
you'll need the ticker symbols for two companies that interest
you. You'll also need access to a 2006 calendar, a calculator,
and a notepad. Next, go to Yahoo!
Finance, sign in, and input one of those ticker symbols
into the "get quotes" box at top left corner. When you arrive
at that company's page within Yahoo!, look at the left menu
under "Quotes" and click on "Historical Prices" for that stock.
Historical
Prices: Go back to the beginning of 2006 in the historical
price list and write down the price of your stock on a day
that you want to use for your investment purchases. Say that
you want to invest on the second Wednesday of each month.
Find the second Wednesday in January 2006 and write down the
price of your stock on that date (high or low or an average
price - your choice, but make it consistent throughout this
exercise). Now, go to February 2006 and find the price of
your stock on the second Wednesday of that month and write
it down. Keep going until you finish the year (you can keep
going into 2007 if you want as well).
Once you've
finalized that list, do the same thing for your second stock.
Pick the same day of the week so that you can compare your
test strategy against a real E-ZVestsm
strategy. When you use the E-ZVestsm plan,
your purchases are automatic. This is a great choice for busy
people, so give it a look and think about your commitment
to this project while you do the following?
Calculate
Number of Shares: Now that you have two lists of historical
prices for your stocks, you're going to figure out how many
shares that you would have purchased with $20. Yes, I realize
that two stocks would equal a total of $40 per month plus
$6.99 in transactions fees, but remember - you are still "watching,"
not investing, at this point.
Use your
calculator to match up historical prices with the number of
shares that you've "purchased" at that price for $20. Divide
$20 by the historical price to determine the number of shares
or portions of shares that you purchased on that date. So,
if your stock sold for $5.00 per share back in January 2006,
then the number of shares would equal four. If the stock sold
for $100.00 per share that month, then you purchased 0.2 shares,
or one-fifth of one share for $20.
Create
the transaction portfolio: You now need a new portfolio
that actually consolidates your imaginary purchases. The watch
portfolio won't allow you to do that, but your new portfolio
will help you realize your purchases as averages without you
having to do the math.
Here are
the steps you need to take to create your transaction portfolio:
- Go
to the "My Portfolios" tab and click on "New Portfolio"
in the drop-down menu.
- Click
on the middle choice of the three shown titled, "Track your
transaction history."
- Now
you can name the portfolio, choose the view (Performance
if you like what you've used to date), and click on several
other options.
- Whatever
else you choose, you need to click on the box for, "Consolidate
multiple lots of the same symbol into one entry in my position
view." This choice will automatically total the number of
shares and price from any given transaction and show only
the averages from those totals in the final view.
- Click
on the "continue" button and you'll be ready to add your
historical prices.
Now it's
just a matter of inputting the following information:
- It's
important that you use the actual date, so backdate your
transactions to the date that you "purchased" the stock.
The transaction portfolio will pick up and utilize that
information.
- The
type of transaction (buy);
- The
ticker symbol;
- The
number of shares (you can input decimals, as the portfolio
will absorb them just fine).
- The
price per share that you figured for that date;
- The
commission (1/2 of $6.99 or $3.50), and;
- Any
notes you might want to make for yourself.
Click
on the "Save and Create Another" transaction button and complete
the list for one and then the other stock. When you're through,
click on "Save," and you'll see consolidated prices and numbers
of shares for two different stocks from January 2006 to whenever
you decided to end your list. And, you'll be able to compare
your previous "purchases" with the stock prices as they stand
now.
You'll
also see that the option choices that you saved in your watch
portfolio are now reflected in your transaction portfolio.
A word of warning - you can change those options at any time
by clicking on "Edit" by the word "Performance" above your
portfolio, but the changes that you make will also be reflected
in all your portfolios in Yahoo!.
Now that
you've accomplished this task, sit tight and watch that transaction
portfolio over the upcoming week or two to see how your choices
fare. You'll learn a lot simply by watching. The next article
will hold a call to action?
Until
Then,
Linda Goin
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