SHARPE INCOME … Today We Focus on Downside Risk

Posted on Feb 27 2017 - 9:42am by Sharpe Trade

The original Sharpe Income post that explains this project can be found here.

The Sharpe Income category be found by clicking on that red ‘Sharpe Income’ tag next to this post title, or by clicking here.

We continue the discussion from the last entry.

We began this project with only $500. All in an effort to help out the small retail investor who doesn’t have a lot of money, understand the importance of growing an income account, as opposed to a trading account. The following numbers are taken from our PDF that is attached below. Remember that these numbers are computed off of Friday’s close …

Total Sharpe Income Balance: $3,591.05
Total Sharpe Income YTD Return: + 3.71 %
Sharpe Income YTD Paid Yield on Cost: + 0.09 %
Total Sharpe Income YTD Maximum Draw-down: – 0.63 %
iShares Barclay’s IEF Return: + 1.4 %
S&P 500 Index YTD Return: + 5.74 %
S&P 500 Index YTD Maximum Draw-down: – 0.70 %

We have placed this weeks ‘capital deposit’ in the category reserved as “dry powder”. Cash that we simply have ‘on hand’ and can move about as we wish. Of that cash, 100% of it was placed in Cash that we will keep on hand in the form of simple ‘tier capital’. Thus, the cash is reserved thusly …

Total Cash: $208.12
Income Assets Cash: $41.35

$41.35 Reserved for future MDT purchase
Remaining Cash “Dry Powder” after Reservations for Income Purchases: $0.00
Capital Gains Cash: $16.77
Reserve Cash: $150.00
Cash for Income Assets: $15.00
Cash for Capital Gains Allocation: $85.00
Cash for Tier Capital: $50.00

Do I even need to say it?  Really?

Do I need to say it?

Yes …

Another new high in the project this week.  Agaain  …


Of course, this will not continue forever.  And to tell you the truth, I have not fixated on the trying to get the account to somehow ‘go higher still’.  I took those actions, 7 months ago. We are enjoying the benefits today, of what we did then.

What I am concerned about today is protecting myself against the volatility of the inevitable downside that comes with holding these income assets for such a long period of time.

As you know, we keep the actual process of this project with clients of the various premium courses we offer.  However, I will say that one of the ways (and there are a few) I am looking to protect myself from the downside risk is the percentage of cash I both have been contributing to the embedded trading strategy (or ‘capital gains’) within the project; and plan to contribute in the future.  Look at how much in terms of a percentage of cash we are allocating to that strategy as of late.  This may be something you see more of in the future.

Again, this is because I am not thinking about what the account is doing today, or how it is ‘performing’.  But what I need to be doing now to protect the project from the inevitable downside.

Do not forget that you can discover how we find such income stocks that are held for years at a time, in Sharpe Trade’s Valuation Investing Course. We discuss this particular project, more in-depth via Sharpe Trade’s Short-Term Trading Course.

The link to the Google Drive Spreadsheet that you can view, that we will edit, build upon and refer to over time can be found at this link.

We continue the Sharpe Income project with this next entry.

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