Investing Plan

I don't let the fact that I have no formal education or training in investing deter me from finding a strategy that works.  But beause I don't have that training, I don't know what signals to look for nor do I know what analysis to do on the data that is present to determine the direction and timing of the next market move.  But I can look at the history of the market to see how frequently certain events have happened.  One thing that I have identified is that the NASDAQ 100 falls by 5% in a one-week period about once per year.  So there is a greater than 98% chance that the NASDAQ 100 will either rise or fall by less than 5% in any given week.  I also know that over the last 5 years, the NASDAQ 100 has been positive about 62% of the time.  This is information that I can work with.

The Process

My investing plan is to make money by selling PUT credit spreads on a weekly basis.  This fits within my level of risk tolerance, and I am happy with reasonable and consistent gains that come in each week.  My plan is to look at the value of NDX each Friday afternoon and to sell a PUT with a strike price that is 5% lower than the price of the index at that time.  I buy a PUT with a strike price that is $100 lower than the put that I sold.  I have about a 98% chance of success with this price range, and each PUT credit spread gains 2% or more in a week.  By using 50% of my cash, I have money to correct the trade for the 2% of the time that the trade goes against me.  I can consistently make a gain of 1% or more on my portfolio's value by getting a 2% return on half of my available cash.  I could absolutely sell my PUT credit spread at a higher strike price, but I am perfectly happy with a 50% gain in a year.

Process Execution

I execute the process in a taxable brokerage account.  After taking 10% of the gains for charitable donations each week, I move the first $6,000 in gains to a ROTH IRA.  I then take the next $2,000 in gains and move those to a Coverdell ESA (Education Savings Account) for my kid's college fund.  After that, I either leave the gains in the account to work towards increasing the number of credit spreads that I can sell, or I take the gains out to cover expenses that aren't in y regular budget.  This year, the unbudgeted expenses included additional mortgage principle payments to shave off about a year from my mortgage.

Proverbs 13:11 - Dishonest money dwindles away, but whoever gathers money little by little makes it grow.