I Did Not Beat the S&P
Why on earth would you want to read about a poor sap who didn’t beat the S&P? If I were a budding new investor, I would say the EXACT same thing. If I were a financial advisor or money manager, I would be a fool to broadcast such sub-par results. However, this is more for myself as a review and hopefully a place where I can improve on. If you gain something from this, great! If not, thanks for stopping by and perhaps you could teach me a thing or two. You can always add to your game, right?
Overconfident and Unrealistic
I’ve always used mutual funds as my vehicle of choice. You know what they say, diversification, don’t put all your eggs in one basket, yadda, yadda. Looking at the S&P chart, we pretty much lost an entire decade. Back in October, I decided to throw some expendable, short term cash at stocks, just to see, you know? Right out of the gate I captured some nice gains with Chipotle and Netflix. I was giddy, I’m blowing the S&P away! I wondered, “Why can’t most money managers beat 10%? This is grand larceny! This is a sham! Is Wall Street all run by Madoffs?!?!” Reality hit as I continued to trade. Eeeked out a little gain here and took a little loss there. I added all my gains and losses at the end of the year and I came out ahead by a whopping 5%!!! Guess it was easy being an armchair quarterback, but when I put my money where my mouth is, humble pie.
What did I learn? It’s not as easy as it looks. Sure you can get lucky here and there, but can you do it for the long haul? Also, try to string singles together and not look for the home runs. You’ll most likely strikeout swinging. For whatever reason, if a stock you were watching takes off, let it go. Actually you have to quickly let things go, good or bad, and focus on the next trade. You can quickly see what went wrong and improve, but don’t waste your time crying over spilt milk. MOVE ON! Some of your trades are guaranteed to lose money. GUARANTEED. If you can’t accept this, stay out of the stock market. Learn to keep your losses to a minimum and fight another day. Finally, continue to keep emotions in check. I know we are all not Mr. Spock, but if emotions take over while trading, the game is already lost. Ironically, while searching for a video to get my point across, I came across this gem. Don’t let the stock market make you become an emotional Vulcan!
I thought of expanding my game by looking at shorting and options. While reading some of my fellow bloggers’ insights, perhaps a better move is took look at other sectors (oil and metals) and broaden my horizon as I’ve been mainly a big name tech follower. Besides that, keep working on my game, learning and improving.
What advice do you have for a new stock market trader?