Money and Portfolio Management

Key Issues • Source of funds

• Personal circumstances (personal debt)

• Risk tolerance and personality type

• Trading Instruments.

• Gearing, reality vs. myth

• Discipline and strategy

• Managing expectations, greed vs. fear.

Source of funds

• Disposable v non-disposable

• Savings

• Inheritance

• Cashed out policies

• Borrowed funds

• Surplus income

Personal Circumstances

• Career path, and time to retirement.

• Personal Debt

• Family responsibility

• Availability of time

Risk Tolerance and Personality Type

• Career path, and time to retirement.

• Personal Debt

• Family responsibility

• Availability of time

Trader Personality Types

• The Accurate Trader • The Administrative Trader • The Artistic Trader • The Adventurous Trader • The Detailed Trader • The Facilitative Trader • The Fun Loving Trader • The Independent Trader • The Innovative trader • The Planning Trader • The Socially Responsible Trader • The Spontaneous Trader • The Strategic Trader • The Supportive Trader • The Values driven trader.

My trading personality

• I have a spontaneous trading personality

• Flexible able to improvise • Able to make connections between events and information and

then make quick decisions. •

One of My Trading Strengths - I can trade a new system easily and comfortably using real money and small position sizing. One of My Trading Challenges - Because I get excited about new things, and like to share often, I can get distracted from that which already works.

Characteristics of a Successful Trader

• Being able to grasp the big picture, to connect events and to identify trading opportunities.

• Being able to use logic and analysis to base trading decisions on.

• Being orderly, decisive and able to operate sequentially.

Characteristics of a Successful Trader

• Being able to grasp the big picture, to connect events and to identify trading opportunities.

• Being able to use logic and analysis to base trading decisions on.

• Being orderly, decisive and able to operate sequentially.

• Best trading types: Strategic and Planner

Trading Instruments

• Equities, conservative, relatively expensive.

• CFD’s and SSF’s – more aggressive and cheaper

• Currencies – very aggressive

• Options – complicated.

Gearing, Reality vs. Myth

• Leveraged or geared products (CFD’s and SSF’s) require understanding a strict money management.

• The reality is that a geared product is often cheaper to trade than an equity.

• The Myth is that because it is geared, you are more at risk.

• An example…..

An equity trade

• We purchase 500 AGL at R230.00

• Exposure: 500 X 230.00 = R115 000

• Capital Outlay: R115 000

• Costs: 115 000 X 0.5% = R575.00

115 000 X 0.25% = R 287.50

Vat and Insider trading levy

A CFD trade

• We purchase 500 AGL at R230.00

• Exposure: 500 X 230.00 = R115 000

• Capital Outlay: R11 500 (10% of exposure)

• Costs: 115 000 X 0.25% = R 287.50

Interest carrying cost

A Comparison

Equity CFD

Exposure/Risk R115 000 R115 000

Capital Outlay R115 000 R11 500

Costs R862.50 R287.50

Even though the gearing on the CFD margin is 10 x, the risk or exposure is exactly the same.

Discipline vs. strategy

Discipline vs. strategy

• Spend more time on disciple than strategy

• Thousands of strategies are available online

• There is NO holy grail

• The inability to accept a loss is the quickest way to the poor house.

Managing Expectations

• Have a very clear idea of what you want from the market.

• Write down your expectations and goals and revisit them in tough times.

• Ask experienced traders to review your expectations.

• Remember that trading IS an emotional rollercoaster, trading under pressure is not ideal.

Greed vs. Fear

• Either emotion is debilitating for trading.

• Position size is primarily governed by these two factors.

• I believe that the key to successful trading is trading the correct position size and managing it accordingly.

• The correct position size frees ones mind to act rationally.

Questions?