All posts by pouncepp

Sell in May and go away?

Stay invested.

May 2010 -16.59%
May 2011 +0.82%
May 2012 -8.6%
May 2013 +9.91%
May 2014 +4.37%

This month I have had 7 days when the gains/losses were greater than the monthly income.  In fact 3 days when losses were greater than monthly income and 2 days when the gains were greater than monthly income.  There were 2 more days of gains that were 2.74 times monthly income and 3.24 times monthly income.

Current annual income 95.45x

Highest annual income 100x

Current retirement savings balance 820x

Current annual savings 73.62x (saving 77% of current income)

Current annual expenditure 21.83x

Current annual dividends earned 29.47x (expenditure less than dividends earned)

Portfolio gains this month 33.5x (that is 4.2 months’ income)

Portfolio gains year-todate 22.96x (to the end of April, it was in the red).

31MAY10 – 30MAY14 +123%

31MAY11 – 30MAY14 +48.48%

31MAY12 – 30MAY14 +64.27%

31MAY13 – 30MAY14 +21.30%

 

 

 

 

 

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Wow, what a day! But I have had 6 of these over the past 5 years

Portfolio gains today: $25.72

Gains year-to-date: $21.32

Current annual income: $95

Highest annual income: $100

Current retirement savings balance: $818

Investment return for the past 7 years: 16,5% p.a.

Current dividends: $28

4-year (16 May 2010 – 15 May 2014) average returns: $78.22

3-year (16 May 2011 – 15 May 2014) average returns: $67.05

2-year (16 May 2012 – 15 May 2014) average returns: $133

1-year (16 May 2013 – 15 May 2014) average returns: $117

Annual income = take-home pay

Perhaps a Ben Franklin would add a bit of colour:

Highest annual income: $100

Current annual income: $95

Current retirement savings balance: $786

Investment return, based on the past 83 months: 15.63%

Investment return, based on the past 83 months’ performance: $123

Higher than the highest annual income 🙂

Savings balance assuming a 42.2% collapse in the markets: $454

Investment return, assuming a 42.2% collapse: 3.82%

Investment return, assuming a 42.2% collapse: $19

Current dividends: $28

All time high savings balance: $850

Added to my portfolio yesterday: $20

Annual income = take-home pay

April

Past performance is no guarantee of future results, but here are some stats:

April 2010 +6.06%

April 2011 +4.4%

April 2012 -6.13%

April 2013 +2.9%

April 2014 -2.51%

Now that that’s out of the way, today was cruel.  Down 2 months take-home pay.  I have had 5 days in a row of losses, a total of 5.25% down,  For the month there where 6 days when the loss for that day was greater than 1 month’s take-home pay and 4 days when the gains for that day were greater than 1 month’s take-home pay.  That’s 10 days in 20 market days in April.  Is that normal?  Last month I had 7 days of gains and 8 days of losses.

For the year, I’m up 27.47% and year-to-date I’m down 1.42%

Annualized returns of the past 83 months are 15.63%

I am off 8.87% of the highs of March 6.  First month since June 2013 when my portfolio has not made new highs.

Assuming the market crashes 42.2% (as it did for me between the 8th December 2010 and 4th October 2011) from my March 6 highs, my annualized returns would drop to 3.82% and if I apply that to my decimated (by 42%) portfolio, the returns would be sufficient to live (frugally) off of.  I have added a 3% inflation every year.  So a 100 today would be 200 in 2036, 236 in 2043 and so on..  My dividends are 1.59 times as much currently and since I am not leveraged, I cannot be forced to liquidate my holdings.

Now with the current rate of return (15.63%) I would have 5½ times as much!

I am not into charts and I like to think I am a mature investor who remains unimpressed even when the chart-speak is in my favor. However, my portfolio’s 100 dma has been breached for the 1st time in a year since I have been following the dma.

“Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.” W. Buffett

And now for the good news.  I sent a whopping 83% of my quarterly income into my portfolio. If that hits my account today, it would bumping up my portfolio by 2.59% but I have had 5 of these greater than 2.59% (up or down) move days, over the last quarter.

I will be shopping next week.  Last time I did this was in February when I followed my rules (for buying) and it was hard*, and I’m up 1.53% on those buys as a whole.  The ones that I almost let me emotions take over and not buy, but did buy (following my rules) are down 19.42%.  I am sticking to my rules! And the ones I was eager to buy and bought because I stuck to my rules are down 9.53%.  Had I bought my eagerness and not my rules, I would have been down 9.53% instead of the up 1.53% as a whole.

“You should always become more skeptical of any investment that has recently soared in price and you should always become more enthusiastic about any asset that has recently fallen in price.
That’s what it means to be an investor.” Jason Zweig

* It will always be a struggle to get through your investing life and stay true to what you know is the right decision.

 

 

 

Market sell-off?

Today I read about the 3 mistakes that all investors make or are tempted to make.

The 1st one is called “availability bias” which is where an investor who has seen markets crash or has been burnt in a market meltdown, feels that since it has happened in the past, it is likely to happen again.

The 2nd is “loss aversion” where one sells too soon to prevent a loss.  Behavioral scientists tell us that a person is sad more when he loses $10,000 than happy when he gains $10,000.

The 3rd is the “probability neglect” where human beings tend to focus on the worst-case scenario and not the likelihood that such a scenario will come to pass.

There is one more namely “disposition effect” in which one closes a position that has appreciated a bit while holding on too long to those that have depreciated.

 

Being the eternal optimist I am, I have never been the victim of the 1st and the 3rd.

I probably have been down the 2nd; I say probably because I do recall, as I do not for 1 second, dwell on my weaknesses and failures.

 

I have come to realize that being an active investor is perilous to one’s financial well-being and takes a toll on one’s mental health.  It is easy to succumb to the temptation being a trader when you have gains of 3 5/16 times monthly income one day  followed by loss of 3 7/16 times monthly income the next day.  And once you go down that slippery slope, there is no escape from financial ruin.  A man could be 60 and may have started afresh several times over a period of decades, each time resolving to beat the odds and trying to time the market, failing and ending up bitter, cynical and distrustful.

 

I believe that the value of my portfolio is hardly influenced little by market events and is driven almost entirely by other investors getting too greedy pumping up the market or getting too fearful and bailing out of markets.  I continued to believe that even as I watched a complete reversal of the market yesterday from slightly negative to hugely positive on plans to link the Hong Kong and Shanghai bourses.  And that “market event” today was subsumed by Wall Street’s rout on Thursday.

 

I am so pleased that I have learned to be immune to these tragedies as I read and re-read Buffett’s quote “I buy on the assumption that they could close the market the next day and not reopen it for five years.”

 

Research has it that people who received frequent news updates on their investments earn lower returns than those who get no news.  Now, I cannot imagine not being current with financial news but if could not contain myself from reacting to news, I would want to make it difficult to act.  I would go with the Dogs of the Dow or SPY or a low-cost ETF.   No fund manager is going dance to the market’s tune or march to his personal or firm’s drum with my money.

An Ode to March

This was the most volatile of months over the pat 54 months of tracking my portfolio.

In the 21 market days during the month of March 2014, I had 7 days of gains where on each of those days, the value of my portfolio that day rose by an amount greater than my monthly income.  I had 8 days of losses where my portfolio on those days fell by amounts that exceeded my monthly income.

Imagine that I took home $4,444 a month.  I had 7 days of gains where the gains on each of those days was greater than $4,444 and I had 8 days of losses where the losses on each of those days was over $4,444

The average over the past 12 months has been 4 days up greater than monthly income and 3 days down greater than monthly income.

So how did I do this month?  Well, down 4.06%, the biggest monthly loss since May 2012, both by value and by percentage.  The recent 22 months since May 2012 have been very, very kind to me.  Also, my annualized returns of the last 82 months have been 16 5/8% compounded.

I had the largest one day gain by value of the 18th March.  The gain that day was the equivalent of 3 13/16 months income.

The largest gain by percentage was on 16th May 2013, up 4 7/8 months income.  What goes up must come down, yes?  Well mean-revert seemed not to be working because the next market day, I was up another 4 7/16 months income.  The day after, Day 3, I was down 2 1/8 months income.

The largest one-day loss was during the “flash-crash” of May 2010 when I was down 9½% but I have had up days that was higher than that down day was lower.  Someday I am going to have an up day where I will be up greater than 9½%

Also this month, I had 7 market down days between the 7th and the 17th March where I was down 6 13/16%.  Not since October 2011 have I had steeper, 4+ down days in a row; where my portfolio was down 11.14% between 28th September and 4th October.

I consider myself to be very, very fortunate having escaped the Global Financial Crisis, simply because between 2000 and 2007, I had no regular job and no savings.  Today I have savings of 8 years of highest income.  Going by the EEE yardstick, my current net worth is 28 years of annual expenses.

I am truly blessed.