I Did Not Beat the S&P

S&P 500

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.

Lessons Learned

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!

Actionable Items

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?

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15 Responses

  1. You’re movie clips are hysterical. No tips from me…I’m reading learning from you.

    • Buck says:

      Glad you like them! Figure add some fun for the readers and it makes it more fun for me to write! 🙂 Cool, we can all learn together!

  2. Buck,

    Keep it simple, ie don’t go into complex investing methods if you’re new, simply buy low – sell high.

    Also, the most important thing to remember is this: your return will match the amount of time you invest doing your homework.

    That would be my 2 cents, Good luck!

    • Buck says:

      Sound advice. I might be making things more complicated for my own good. To be honest, I really should do more homework, thanks! 🙂

  3. Also make sure you fully understand what you are investing in and why. Netflix and Chipotle could have been nice plays, but did you do them because you recognized the name, or because they had solid financials and were poised to grow?

    I only invest in maybe 8 stocks a year. But I know the ins-and-outs of each one, and I am as comfortable owning it as I would my own business. I am wrong sometimes, but usually it plays out very well.

    • Buck says:

      You’re totally right. I recognized the name and had some basic knowledge about the companies, but didn’t really do my due diligence. Thanks for calling me out. 🙂 Great point about knowing the ins and outs and being comfortable owning it as my own business. Will work on adopting this mindset. Thanks again!

  4. Moneycone says:

    Have a core investing strategy and have a little thrill money. Use an indexing approach with periodical rebalancing and a proper asset allocation if researching individual stocks don’t appeal to you.

    Use thrill money for speculation and/or learning the innards of investing.

    • Buck says:

      Great advice. Will work on this for my future trades. Interesting point about some thrill money. I think it fluctuates and it negatively impacts my trading. Need to be more disciplined. Thanks! 🙂

  5. At the risk of self promotion, you must download my free ebook 20 minute guide to investing on my site. There is a wealth of empirical research that supports beating the market is a losers game. Even if you succeed one year, the likelihood of repeating is slim. I suggest allocate your funds into diverse groups of index mutual funds or etfs in US Stock, International Stock (including developed and emerging Markets) and a small alloccation to bond type investments. (although avoid bonds now as they move in the opposite direction of interest rates and will lose value when interest rates rise). If you’re interested in individual stocks, be prepared to spend lots of time understanding financial statements, ratios as well as researching the competitors and industry. Best of luck to you.

  6. So random that I stumbled upon your page today on Yakezie forum. I am finishing up a video eCourse on investing called SimpleVesting – Invest Without Fear. Should be released next month. Shoot me an email if you want to do a JV.

  1. January 8, 2011

    […] Buck Inspire: I Did Not Beat the S&P […]

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