Friday, December 30, 2005
A new year begins
After being down more than $4,000 earlier today, my portfolio managed to claw back to near break-even for the day. Although I still finished the week in the minus column (down 0.3 percent), this was better than S&P 500 (down 1.6 percent), the NASDAQ (down 2 percent), and the Russell 2000 (down 1.9 percent).
For the year as a whole, my portfolio performed exceedingly well, much better than I had expected and quite frankly, much better than it I am likely to do over the coming years. I know many people like to set goals for what sort of return on their portfolio they hope to achieve. I don't believe in doing that because I think there are too many things in the stock market that are outside my control. All I can do is work hard, do solid research into potentially winning trades and investments, and continue to innovate.
The latter is particularly important. I have said before, and I will say again, that I think the value based strategy that has worked so well for me over the past 5 years is slowly running its course. Don't get me wrong, I believe that over the long haul, investing in value stocks will yield superior returns than investing a broad index fund. However, value investing isn't the only way to make money. In fact, historically, a strategy based on momentum (buying stocks that have been winners over the past year and selling stocks that have been losers over the past year) has fared much better than any other investment strategy, including value based investing. I will write more about this issue in another post (and give you some solid empirical evidence to back up this assertion), but for the time being, suffice to say that in 2006, you will see a more holistic and broad based investing strategy from me than you saw in 2005.
This will also include a bit more trading, something that I am more comfortable with now than I was in the past. To this end, I have moved quite a lot of money from my Ameritrade account to my Scottrade account over the course of this year, which will allow me to trade more cheaply (Ameritrade charges $11 per trade, while Scottrade charges $7). While I won't become a daytrader (and indeed, I could not become a daytrader since I have a full time job which does not allow me to check my portfolio more than once or twice per day), I think a few more well-selected trades could supercharge my returns.
For the year as a whole, my portfolio performed exceedingly well, much better than I had expected and quite frankly, much better than it I am likely to do over the coming years. I know many people like to set goals for what sort of return on their portfolio they hope to achieve. I don't believe in doing that because I think there are too many things in the stock market that are outside my control. All I can do is work hard, do solid research into potentially winning trades and investments, and continue to innovate.
The latter is particularly important. I have said before, and I will say again, that I think the value based strategy that has worked so well for me over the past 5 years is slowly running its course. Don't get me wrong, I believe that over the long haul, investing in value stocks will yield superior returns than investing a broad index fund. However, value investing isn't the only way to make money. In fact, historically, a strategy based on momentum (buying stocks that have been winners over the past year and selling stocks that have been losers over the past year) has fared much better than any other investment strategy, including value based investing. I will write more about this issue in another post (and give you some solid empirical evidence to back up this assertion), but for the time being, suffice to say that in 2006, you will see a more holistic and broad based investing strategy from me than you saw in 2005.
This will also include a bit more trading, something that I am more comfortable with now than I was in the past. To this end, I have moved quite a lot of money from my Ameritrade account to my Scottrade account over the course of this year, which will allow me to trade more cheaply (Ameritrade charges $11 per trade, while Scottrade charges $7). While I won't become a daytrader (and indeed, I could not become a daytrader since I have a full time job which does not allow me to check my portfolio more than once or twice per day), I think a few more well-selected trades could supercharge my returns.
# posted by Stockcoach @ 4:39 PM 
Comments:
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Thanks for your blog. I appreciate your picks, some are too illiquid for me to consider, but most all are truly value stocks.
For low commissions, consider Ameritrade Izone. $5 commissions, only downside is all electronic communications, which to me is not a problem.
For low commissions, consider Ameritrade Izone. $5 commissions, only downside is all electronic communications, which to me is not a problem.
# posted by 
: 7:56 PM, December 30, 2005
: 7:56 PM, December 30, 2005
You only check your portfolio 2 times a day, i dont know how you can do your job with over 250,000 in stocks, doesnt make sense, i have a small account and i check my stocks at least once every 5-10 minutes and im not near a computer most of the time. This is what you should do, get a cellphone with access to the web, both scottrade and ameritrade give you access to wireless trading. From there you can view gain/loss trade on the go for the same price as you would on the internet. I have made plenty of trades from the road on the go when the markets were in either rally mode or decline mode, it works fine as long as you have a connection. The cost to have unlimited web on your phone varies from carrier to carrier, 5-30 bucks depending on the package. As for the commissions izone does offer $5.00, or you can go with brown & co for $5.00 too, i think anyone paying more than $7.00 for a trade in 2006 is not trading right.
BOB
BOB
# posted by : 10:20 PM, December 30, 2005
: 10:20 PM, December 30, 2005
Bob
Brown $5 commisssions is not comparable to Izone $5 commissions.
Brown is restricted to market orders, Izone is for any order type and any number of shares. The only other broker that low would be lowtrades or interactive brokers, but only for a certain number of shares. I used to have Freetrade, before it morphed into Izone, and that was the best ever, but that's another story.
Brown $5 commisssions is not comparable to Izone $5 commissions.
Brown is restricted to market orders, Izone is for any order type and any number of shares. The only other broker that low would be lowtrades or interactive brokers, but only for a certain number of shares. I used to have Freetrade, before it morphed into Izone, and that was the best ever, but that's another story.
# posted by : 3:01 AM, December 31, 2005
: 3:01 AM, December 31, 2005
Although my port is only about $100K (smaller than yours), I have managed between 50% and 100% gains per year for 3 years running. I have a very different style, however. Whereas you focus on value stocks (and they seem to be quite illiquid), I focus on very short term trades of very oversold sold stocks. I look for stocks trading at or below cash, or those that sell off with what I consider to be inconsequential news. For example, a big winner of mine this year was AVNC, which was a small biotech which at one point was selling at 2/3 cash per share, and within a span of 2 days doubled in share price. A good pick right now is AXYX, which sells at about 3/4 cash per share and is down temporarily due to tax loss selling.
# posted by : 4:58 AM, December 31, 2005
: 4:58 AM, December 31, 2005
On your blog, you have a link for both long and short positions, but I don't see any short positions listed.
Have you ever used short positions in ETF's or short Rydex/Profunds funds to hedge your portfolio? What would you use as a market indicator? I sometimes look at the Mango kayak web site for ideas on portfolio hedging.
George
Have you ever used short positions in ETF's or short Rydex/Profunds funds to hedge your portfolio? What would you use as a market indicator? I sometimes look at the Mango kayak web site for ideas on portfolio hedging.
George
# posted by : 5:44 PM, January 01, 2006
: 5:44 PM, January 01, 2006
george
i follow a ton of ETFs, right now if i had to short any it would be the transports, i really think they are due for a pullback, one IYT, already 2 points off its 52 week high could easily fall to 70-72 if january starts off down. As for RYDEX and PROFUNDS they have funds that move twice the amount the nasdaq 100 will move in both directions. I like USPIX if the market looks overbought, its trading around 15, and major dip in the nasdaq and its headed back to 18-20 a share. Only thing about trading the profunds and any other mutual fund are the costs thats why ETFS are taking off, you can trade them on the open market just like any other stock. No need to wait until the end of the day for your trade to settle. What ETFS are you focusing on for 2006. Some ETFS I follow are EWZ, EWJ, OOO, IJJ, NYC , SMH, VDE, VCR, PXE, PBE, IBB and PSI.
BOB
i follow a ton of ETFs, right now if i had to short any it would be the transports, i really think they are due for a pullback, one IYT, already 2 points off its 52 week high could easily fall to 70-72 if january starts off down. As for RYDEX and PROFUNDS they have funds that move twice the amount the nasdaq 100 will move in both directions. I like USPIX if the market looks overbought, its trading around 15, and major dip in the nasdaq and its headed back to 18-20 a share. Only thing about trading the profunds and any other mutual fund are the costs thats why ETFS are taking off, you can trade them on the open market just like any other stock. No need to wait until the end of the day for your trade to settle. What ETFS are you focusing on for 2006. Some ETFS I follow are EWZ, EWJ, OOO, IJJ, NYC , SMH, VDE, VCR, PXE, PBE, IBB and PSI.
BOB
# posted by : 12:10 AM, January 02, 2006
: 12:10 AM, January 02, 2006
hello
might want to check CKSW - Clicksoftware Tech. for a long play.
Chuck
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might want to check CKSW - Clicksoftware Tech. for a long play.
Chuck
# posted by : 6:55 AM, January 03, 2006
: 6:55 AM, January 03, 2006 << Home
