Friday, December 5, 2008

Stocks Update: Keeping Score

A year ago--December 7, 2007, to be exact--a good friend and I started arguing about how to invest. My friend and I don't usually agree on stocks--he's more of a technical analyst, and I'm more into macro-economics. For example, he hates Coca-Cola (KO), saying he'd never invest in sugar water, while I like its consistent dividend and international business. He looks for major growth stories, while I look primarily at balance sheets and avoid companies with too much debt. When he and I have agreed on stocks, however, we've never been wrong, at least not in the short-term. Still, we decided to resolve our differences by opening up virtual trading accounts to compete against each other and also decided to keep track of our actual investment performance. This way, if we continued to argue, we would have both actual and virtual evidence to support our investing styles.

I am winning in both the virtual stock games (, but that's because I kept most of my investments in cash, while my friend bought commodity-based companies.

In real life, I have been tracking my retirement accounts. My friend won't tell me exactly how badly he's doing, but apparently, I'm doing better (I'm down "way more" than that, he told me, after receiving news of my percentage drop). I am not gloating at all--I had positive performance through the first week of September 2008. I should have sold everything then, but didn't.

As a result, from December 7, 2007 to December 5, 2008, my retirement portfolio has declined around 23.5%. I can't provide an exact percentage, because I added monies and invested them at different times throughout 2008. In fact, I made so many trades in my 401(k), T. Rowe Price barred me from trading again until late January 2009.

Meanwhile, the S&P 500 declined 41.77% during the same time period (December 7, 2007 (1,504.66) to December 5, 2008 (876.07).

So, I beat the S&P 500 by around 18 percentage points. Ordinarily, I'd be elated, but this year, for obvious reasons, I am not happy at all.

I am looking forward to continuing the competition for the next twenty years. My prize in winning against my friend this year? A Peet's (PEET) coffee of my choice. I do love their eggnog lattes, but I was so close to having positive performance, it will be painful to sip that latte. I am in my early 30's, so I have plenty of time to ride out this recession. But oh, what a difference a few months makes.

Update: my non-retirement accounts should be in positive territory for 2008, because I am typically risk-averse with my liquid assets. I am now 100% in money market funds in my non-retirement accounts. Excepting day-trading and short-term trades, I have probably kept 80%+ of my liquid assets in money market funds this year. Off the top of my head, my two worst performers, in terms of actual monetary losses, have been JMBA and YHOO.

No comments: