Plan 5’s first month is finished, and the results look good! Let’s dig right in — here’s what happened to the Plan 5 Monthly picks during their first month:

Plan 5 Monthly: August 2013 Results

Three out of August’s five picks went up substantially, more than balancing out the other two that lost ground. The result is a total portfolio gain of 8.05%, easily beating out the S&P 500 which lost 4.01% over the same period.

That makes an excellent first month for Plan 5, but keep in mind that not every month will produce terrific results like this. Back testing shows Plan 5 Monthly losing value in roughly one out of three months, and Plan 5 Quarterly losing value in one of five quarters. So, be prepared to see a minus sign in the bottom line every so often. What’s important is that the value of our portfolio rises more often, and more steeply, than it falls.

Now let’s focus on the present. Here are the Plan 5 Monthly picks for September:

Plan 5 Monthly: September 2013 Picks

If you’re following along with Plan 5 Monthly, here’s a review of what to do now. Because 3 out of the 5 picks are carrying over from last month, you won’t need to sell all of those 3 positions; you’ll just need to buy or sell however much is needed to balance those three, so that you’ll have roughly the same amount invested in each of September’s 5 picks at the beginning of the month.

So the first thing you’ll want to do is add up the values of all 5 of last month’s positions. Say, for the sake of example, that you had invested $1000 in each of last month’s picks. Then, due to some of the picks gaining value and a couple of others losing value, the sum of your 5 positions would now be equal to roughly $5425. If you want to add any money to your Plan 5 investment this month, now’s the time to do it; just add it to that total. For this example we’ll assume no new money is being added, and the total investment will remain at $5425. Now divide that number by 5 to determine how much you’ll want to have invested in each of September’s picks: roughly $1085.

Two of last month’s picks did not carry over to this month: Mobile Mini and WisdomTree Investments. You can start off by selling your entire position in those two stocks.

Now, each of the 3 picks that are carrying over from last month went up substantially — so much so that you’ll need to sell off a little bit of each of them, to bring your investment in each one as close as possible to $1085. So for example, Caesarstone gained 27.32%, so your $1000 investment would have become roughly $1273. You’ll want to sell only enough shares to bring the value of your investment in Caeserstone down to being as close as possible to $1085. In this case, since Caesarstone shares are selling for $41.76, you’ll probably be selling 4 or 5 shares. It won’t be possible to get each of your investments to be worth exactly $1085, of course, because you can’t buy or sell fractions of shares. Some will end up a little high, others a little low. That’s okay.

Had Caesarstone’s value gone down instead, then you would be buying the shares you’d need in order to reach your target of $1085, rather than selling shares.

Once you’ve taken care of re-balancing each of the holdings that have carried over from last month to this month, and you’ve sold off the positions that are not carrying over, then the remaining proceeds from what you’ve sold should be able to be split roughly evenly among this month’s two new picks, LinkedIn and Boston Beer Co., to bring your investment in each of them very close to your target of $1085. The end result is that the money you’re investing in Plan 5 should now be roughly evenly split between all 5 of September’s picks.

If you’re not sure you have a handle on this (it may take running through it a couple of times to master it!) you might want to review how Plan 5 works, here.

That’s all there is to it! Now we can sit back and let our money do its thing until the end of September.

Before I go, here’s a quick review of how Plan 5 Quarterly is doing. There’s nothing for Plan 5 Quarterly investors to do this month except sit tight — but it can be interesting to keep an occasional eye on how our investment is doing. Just watch out not to sweat it day by day, or even month by month; Plan 5 is designed to work over the course of years, and keeping too close an eye on the daily ups and downs can just cause unnecessary stress.

Plan 5 Quarterly: August 2013 Progress Report

With a gain of 13.7%, Plan 5 Quarterly had a great month, even better than Plan 5 Monthly.

That wraps up this month’s post, and a very satisfying first month it was. Enjoy the last days of summer, and I’ll be back with another update at the end of September.

Thrive!

Mike Ferrier