Last week I posted my personal challenge of stocks versus an ETF. In actuality, I had held positions for a few weeks. To review, my stocks were AAPL, CMG, and PCLN. My ETF was QLD. In this short time span, stocks were outpacing the ETF with 6% gains to 3%. However, the stocks nice pop was carried by one single stock, AAPL at 11%. The other two were struggling at the time. Like I said, this challenge will go on for a year, but I thought it was an interesting early look. This news was miniscule compared to what happened last week.
Gaddafi Gags The Markets
With tension mounting in Libya, world markets tumbled. INO.com trend analysis signals sent me to the sidelines, running for cover. My position in CMG still had strength, but a midday swoon took me out as my 8% stop loss was hit. I exited QLD the following day as the markets looked done for. Interesting thing happened; the markets rebounded.
Tale of the Tape
AAPL: -87.40, down 4.87%
CMG: -104.00, down 8.13%
PCLN: -91.20, down 5.05%
Total: -282.60
QLD: -209.49, down 4.23%
Both sides of the challenge suffered losses, but the ETF suffered less. So at this moment, the ETF is outperforming my stock picks. Interesting, looks like the jury is still out. We’ll see what happens after a year. Side note, during this time I added ROSE to my watchlist after reading BeatingTheIndex’s post on The Alberta Bakken Oil Play. Due to the situation in Libya and skyrocketing oil, ROSE is now up about 13%.
ARE YOU ON CRACK?
I know, you must be thinking. “Buck, let me get this straight. Your entire portfolio is in the red. The stock you didn’t pick is up 13%. The market recovered, leaving you in the dust. You say these are your best trades ever? What gives?!?!” For years, the market played with me like a puppet. Two bubble bursts, one flash crash, one very serious margin call, several nervous breakdowns, numerous negative world events, and tons of earning disappointments.
I’m Finally Free
Last week, although my portfolio was in the red, Libya was deteriorating, oil spiking, and my readers have full view of my “failings”; I was in complete control. I was finally free. I finally detached my emotions from the market. In the past, I would be writhing in agony. “I lost my hard earned money! I can’t retire properly! I look like a fool! You have no business trading! Don’t quit your day job!” Besides the negative inner chatter, I would try to overcompensate for the losses and make more trades or chase my lost paper gains. This usually ended in even more losses, sending me spiraling even further! I think you get the picture. Although I took some losses, these trades really are my best trades ever.
Final Thoughts
I am currently out of the market and will quickly reassess what to do next as the challenge continues. Hindsight is 20/20, but perhaps my signal of hitting the sidelines was premature. However with all the current world news headlines, at the time, it really looked like we were finished. It’s back to the drawing board. Don’t get the wrong idea. I am not looking to give investment advice as there are tons of more savvy investors than me.
Beating The Index
The College Investor
101 Centavos
Money Cone
The Dividend Guy
Buy Like Buffet
What I am doing is trying to make myself a better trader by first dealing with my emotions and being accountable to my readers. If you are struggling with the markets, doing your due diligence on the companies you follow is important. But don’t forget the most critical component in trading stocks, yourself.
What’s your best investing advice?
Stay Inspired!
Buck
Buck, you must stay inspired! I just finished my taxes, and although my winners outdid my losers, I still had several positions where I lost about 30% of the original investment. Sometimes your emotions get to you. I always tell myself a 10% loss is where I cut it off, but I have a hard time doing it in practice. That is my goal for this year, and the College Investor portfolio helps with that because I hold myself accountable to my readers!
Thanks for the encouragement and sharing your experience!
Emotions are a killer. I have to say, blogging, and being accountable has helped quite a bit.
Never buy or sell based on market direction (unless you are speculating, which I confess, I do from time to time!). But do so based on your evaluation of a stock.
I actually look forward to market corrections like the most recent flash crash, when I hoard up on select stocks!
But keeping emotions in check is a great step forward! Swimming against the tide is even harder to conquer!
Good advice and great point about corrections a time to hoard your stocks. Easier said than done. I still remember laughing to myself when Buffett started loading up on Goldman Sachs while the world was fighting for its economic lives. I thought he had lost his mind. Guess we all know who the Oracle is and who isn’t.
And hey Buck, thanks for the mention!
Don’t mention it!
Stick with the basics! Dollar cost averaging and asset allocation. Although I own stocks, mutual funds and ETFs, most of my portfolio is in mutual funds and broadly diversified. What this means is I am mostly removed from the highs and lows. My goal is steady growth.
Great advice! I agree. I wish I removed the highs and lows earlier. I think it’s human nature. Wanting a good price, greed, who knows. Buy low, sell high ends up buy high, sell low, real fast!
Do you have a favorite investor?
Hi Buck – first of all thanks for the link and including me in such illustrious company ( Flattery works every time, keep it coming.)
Although it’s easy for me to say that emotions will absolutely slay you, it’s a little harder to resist in practice. If the market were to take a swoon tomorrow, I’d have to do something like reading affirmations or reciting mantras to calm my fluttering heart, and reminding myself what a great buying opportunity it would be. Time to swing plan B for Buy into action.
If it’s a good value at 20, it’s a screaming bargain at 10.
Flattery makes the world go round.
Good point, easier said than done. I think putting it down on paper and being accountable helps. Short term memory and excuses in my head wipes out many trading lessons along the way. In doing this, I hope to remind myself to stay the course and hopefully improve along the way. Another good point about bargains. Sometimes it’s hard, even though it seems obvious later, when the whole world is screaming we’re doomed! Do you have a favorite investor?
Not anyone particular “guru” investor, although I like Graham, Jim Rogers, and the folks at Casey Research, all for different reasons.
I don’t think I follow a particular guru, too. I did read some Lynch and William O’Neil.
Buck, don’t try market timing the short term moves. It doesn’t work and you will burn your nerves. Write down why you invested in a company you picked with your exit target and remind yourself of these notes every time emotions creep back into you.
Thanks for the mention!
You’re welcome!
Thanks for the advice. Will keep it in mind as I try to keep my emotions in check.
My best investment advice is do not invest in anything other than index stocks unless you really know what you are doing. My second best piece of investment advice is to not allow your dog to “choose” your stocks for you.
Sound advice. Wait a minute, isn’t your dog picking your stocks for you? Haha, reminds me of that chimp who randomly picked stocks and was outperforming pros.
I’m great with managing money I earn, but I’ll be the first to admit it…
I. Suck. At investing!
I hope to learn from you guys who seem to know what you’re doing!
At least you know you have issues. Some folks don’t and continue making the same mistakes. Well, let’s all learn together!
Buck,
Congratulation on being free from the emotional roller coaster! I think that’s really the first sign of a mature investor.
I sold some stocks over the last few weeks, but not because of the unrest. I’m beefing up my cash position for my 4 plex down payment.
Thanks! Emotional roller coaster it is. I would say I’m on my way to being a mature investor.
Way to diversify. Good Luck with your 4 plex!
Emotions will mess up good trades and bad trades! Good job staying in control. I blew my entire first forex trading account based on fear and greed. Once I conquered my emotions I started trading better. I recently made 34% return on the Euro in just one month. I’d rather lose a trade because I made a bad trading decision than lose a trade because I lost my cool.
Trying my best. It really helps now that I can freely talk about it.
That’s some awesome returns. Do you still Forex trade? Isn’t it more risky than stocks?