Category Archives: Stocks

Disappointing 2013 Stock Portfolio Performance But Promising New Start

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I hate when this happens…

Midway through the 2013, I was beating the Stock market indexes (S&P 500 and DOW) by about 10%.  I could do no wrong!  Then it happened, instead of all the right moves, I flipped over into bizarro world and everything that I did was wrong.  Not wrong enough to hurt my returns drastically (I ended the year up over 20% in my regular brokerage account), but enough to pull down my 10% premium above the market that I had midway thru the year last year.

So what happened?

I over-traded, over-analyzed and over-reacted.  Once I started down that path, it was pretty much over for me (pun intended).  It’s an easy path to go down in the stock market.  Sometimes when you are very successful, your emotions start to take over and when you are up decently, you start to think that anything you do will be golden.  Well, it doesn’t happen that way always.

Okay, I have to admit, this has me bummed, but at least my Roth IRA gained 48.7% and my 401k was up over 30% for the year.  Still, having just one of my accounts underperform the S&P 500 index definitely bums me out.  I have to wonder if it wouldn’t be easier just to put a sizable amount into a S&P 500 index ETF and just let it ride.

The same stocks that hit me hard at year-end also have been surging at the beginning of this year.  While the stock market has been close to flat YTD, my regular account is up 5% YTD, so maybe I’m not doing so horribly after all.

Either way, 2014 seems much more questionable and I seriously doubt that it will rise unabated like the 2013 year climbed.  Every year I think I learn a little more about investing and the stock market behavior.  Investing to me seems like a constant state of learning and refining.

Out with the old, and in with the new, good luck everybody!

Don

Am I Too Greedy In This Stock Market

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We’re almost at the half way point of the year, and I have to wonder if I am too greedy in this stock market…

One my goals this year was to increase my income by 50% more than I did last year.  I expected to increase my net worth with income from my online activities, but certain things haven’t panned out so instead I decided to focus my time and money on creating stock market gains.

401k History

401k Performance History

I accomplished my goal, and then some.  In fact, I doubled my income from last year instead of just increasing it 50%.  That said, it would require me to sell all of the stocks in my portfolio to realize that gain.   This creates a few problems for me.

  1. If I sell my stocks, I will encounter a tax hit which I don’t want to pay since my withholdings aren’t enough to cover my gains.  And if you know me, you know that I hate to underpay my taxes.  I hate having to pay the government after a pricey Christmas.  It always puts a crunch on our finances.
  2. The stock market seems to be a “goldilocks market”  meaning that everything is perfect for the market and it could keep going up.  This makes it hard to put money is cash when the market might rise 10 more percent, or even go sideways.
  3. The market is starting to take on the looks of a parabolic curve.  When things go up too quickly, typically there is a correction period to get things back into a mode that’s normalized.
  4. I have this believe that if I watch it closely enough, I think that I could get out before it hit the bottom of a correction.  Of course, this logic is flawed, and yet still I stay invested…

I have to wonder if the prudent person would take 20% this month, 20% next month or 2, then another 20%… until she/he only has 20% invested in the market.  I think the prudent person would never completely exit the market.   Then once the correction, or the parabolic curve is broken by going sideways for months, then and only then jump back in with some strategy.

Decisions, decisions…

Don

Am I Focusing Too Hard On Investments?

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Since the beginning of this year, I’ve been focusing with laser-like intensity on the stock market… But I have to wonder if the extra time is worth it, or perhaps I am focusing too hard on investments!  It’s hard to draw a distinct line when it comes to making money.

There is a rule called “Pareto principle” that basically states that with 20 percent of your effort, you encounter 80% of your results.  So basically the more time you put into a situation, the less results you encounter.  When you put in a more time with less results, that’s called diminished returns.  And some people even claim that if you put too much time, the results actually go negative and you actually start to do damage to your goal.

RothIRAPerformanceSM

I think I might be at that point in time.  I’m thinking and putting in way to much time in the stock market, but the benefits are questionable.  Some things in life (like investing) requires time and patience.

I’m currently following the stock market like a hawk, trying to increase my returns.  My primary stock I plan to hold for at least 2 years, and maybe much longer.  Each day I’m checking up on the stock, reading the thoughts and commentaries about it.

But is that time really worth while?

Based the Pareto principle, it’s obvious to me that I’m putting way to much time into researching the stock.  I’ve done enough work to know that it’s a good investment, and the business model is such that it’s not a dynamic company that could be easily wiped out tomorrow.  It’s stodgy and predictable, so the extra time I’m putting into researching it, and watching the daily valuation of the stock price, is a total waste of time and life.  I could use the research time for new leads instead of watching my favorite stock.

All that I said above is true, and yet it is still so hard to “not” watch my favorite stock.

If you dabble in the stock market, do you find that you have similar issues?

Bests,

Don

2013 Late To The Stock Market Strategy

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For the past few years, I’ve been in dividend stocks, but now I have to wonder with the rally in the stock market if I shouldn’t shift into non-dividend paying growth stock instead, at least for the time being… Or am I too late now?
A lot of stock already had decent run up in the stock market, and I’m late to the game with this strategy.  I wonder out loud, “is there still some stocks that haven’t appreciated that I can still get in?”  I’m hoping so.  Stocks that have my interest are financial and insurance stocks in particular.

The reasons that I’m interested in financial stocks are the following:

  • Some financial stocks that fell deep and hard are still valued cheaply, especially considering that a lot of these companies acquired other troubled financial firms.  For instance, Bank of America still owns Merill Lynch, and Merill is doing quite well from what I late heard.
  • Some are still down 90% or more from their highs back in 2007, these banks aren’t going away without the collapse of america, so they should be a good buy, or so it would seem.
  • Alternatively, the mechanism that provided the primary growth for the banks and made them a great investment was the mortgages, and the market for that stream has become much more restricted, especially the sub-prime market (I hope).

As for insurance companies, I’m mostly interested in the bad boy of the housing collapse, AIG.  You see AIG, although an insurance company got involved in mortgages too and obviously did so very poorly.  Apparently they don’t believe in risk management when it comes to business.  But the beauty of AIG is that their stock is still less than 95% of their former value.

AIG

At one time the government practically owned all of their shares of stock, but that is no longer the case, and hopefully they should reinstate their dividend policy again sometime in 2013 and probably at the latest 2014.

Both financial institutions and the AIG insurance company seem like a risky investment, but they also have a lot of potential with little downside left.

So now you know my strategy.  Please remember that this is all for fun and I’m not making any investment recommendations of any sort.  This is just what I’m going to try…

Best,

Don