Holdings Update Take 2

Well after yet another monumental day of losses on Wall Street, I thought I'd keep up my promise to inform you faithful few what your's truly owns....

As of closing time October 15, 2008 I own shares of:
- Actuate Corp (ACTU)
- American Oriental Bioengineering (AOB)
- Enterprise Products Partners (EPD)
- Global Industries LTD (GLBL)
- General Steel Holdings (GSI)
- Intellon Corp (ITLN)
- Melco Crown Entertainment LTD (MPEL)
- NovaMed Inc (NOVA)

I also own put options for GSI, Alcoa and The Great Atlantic & Pacific Tea Company.

For a rough introduction to put options, you can refer to my previous post here.

On Monday, feelings were good and optimism was high on Wall Street as the markets flourished, with the Dow, Nasdaq and S&P 500 all climbing over 11%. Well today it rained on our parade, with the markets giving up those gains begining yesterday.

Such is the state of the market these days. Brief moments of upward movement, followed by punishing days of freefall. If you look at my holdings(the non-option ones), you can quickly see that my portfolio has taken a large hit too.

But I haven't stopped investing.

There's a technique that's called dollar-cost averaging. Basically, you plan to buy shares of a company in stages. For month one, you buy $200 worth of shares and continue to do so for a certain amount of time. Many investors buy in thirds - or for 3 months. That way, if in the short term the share price falls, you can scoop up more shares for the same amount of money ($200). The flip side is if the share price rises, you're getting fewer shares for your money. The idea is that you protect yourself against short term price drops and can average out your cost basis (cost you've paid per share).

It's fortunate that I've continued to pick up shares along the way, because almost all of my initial purchases are now deeply in the red. The theory goes, if you liked the company at $15/share, you must love it at $5/share. Of course, if the value is dropping for a valid reason (i.e. the company is going bankrupt) then you should likely sell. But with the current market conditions, many good companies are being thrown out with the bathwater. It's up to us to go find those opportunities.