The Account and my First Trade

Current Account Size

As of 12/11/16, the brokerage account that I will track on this blog currently has a balance of $51,121.23.  The broker I am using is TD Ameritrade.  I used Ameritrade in the past and enjoyed the service, plus their commissions are reasonable ($9.99 per trade).  My first trade occurred on Friday, 12/9.  I purchased 103 shares of NHTC, Natural Health Trends Corp.

NHTC – Trade #1

I goofed a bit on the trade, a mistake I would like to avoid in the future.  I originally placed a limit order for the 103 shares at 24.70.  I grew impatient that the order wasn’t being executed in time and switched to a market order.  This actually caused me to incur an additional brokerage fee of $9.99.

In any case, the order was filled with 5 shares at 24.7 and the remaining 98 shares at 24.7847.  The stock closed on Friday at 25.16.

Why did I select NHTC?  The stock boasts an impressive price/earnings ratio of 5.89.  It also has zero debt and has been consistently producing earnings each quarter.  A look at the stock chart is quite terrifying, as the stock is currently down 46.62% for the year.

Of course, that’s Mr. Market talking.  Whenever a stock is as cheap as this one, the chart is bound to look terrifying.  The opportunity for the value investor is to ignore that noise.  A diversified portfolio of stocks like these should beat the market averages over the long run, even though at an individual level they will look quite terrifying.

Defining Risk

In finance classes, risk is defined as beta.  Beta, simply defined, is the amount of volatility in the underlying stock.  How volatile is the price movement in the last year?  A beta of 1 implies that the stock perfectly matches the risk in the overall market.

NHTC’s beta is 2.27.

I don’t care about beta.  Risk is the likelihood that I will lose money.  While NHTC currently has a high beta, it is also making money and has no debt despite its problems.  In my opinion, the debt-to-equity ratio captures risk to a far more accurate degree than the movement of the price on the chart.

Why 103 shares?

A rule I would like to stick with in this portfolio is that I will not purchase a holding that exceeds 5% of my overall account balance.  My position in NHTC was purchased for $2,551.50, or 4.99% of my total portfolio.  When fully invested, this will help me have a portfolio of at least 20 stocks at any given time for an adequate level of diversification.  If I cannot find a sufficient quantity of bargains, I will then at least have a nice cushion of cash to deploy when the market falls and bargains become more plentiful.

Another rule I will stick with is that I will not deploy leverage of any kind.  I will not borrow money to purchase stocks.  Leverage is nothing but trouble.

PLEASE NOTE: The information provided on this site is not financial advice and I am not a financial professional.  I am an amateur and the purpose of this site is to simply monitor my successes and failures.

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