If you’ve read any other investing articles, you might have heard the phrase “beat the market” about 11,398 times. Basically, investors measure their worth by how their portfolio compares against the stock market’s performance overall, often measured by the S&P 500 index. I thought it would be fun to compare the blog to the market in 2014, by assuming I had made every investment idea I wrote about. The result? This little blog could have beaten the market by over 1%.
I went through every post I wrote in 2014, and noted where I wrote a buy or bullish suggestion on a stock. I compared the stock’s price on the day of the post (or the target price if the stock met it) versus the stock’s closing price on December 31st (or the target exit price and date if the stock met it). For simplicity, I assumed that I invested an equal amount of $1,000 in each stock, and didn’t include dividends or adjust for annualized returns. I also excluded one personal investment I wrote about, Inovio (INO), because they had a complicated stock split and I sold it when it popped over the summer due to Ebola fears. And finally, I didn’t double-count recommendations. If I wrote about a stock multiple times on the blog (i.e. Restoration Hardware, Apple), I only included the first post I wrote about it.
So what was the magic number? Drum roll please…
If I had invested my money every time I wrote an investment idea on the blog, I would have a 12.8% return for 2014. That’s over 1% higher than the S&P 500’s 2014 return of 11.4%. I felt even better about that after reading that two of Warren Buffett’s protégés failed to beat the market.
Obviously, this exercise doesn’t mirror real life, as portfolios tend to invest different amounts in each stock, and I would have had to hold enough cash to invest in every one of these. So take the returns with a grain of salt. But going through the tally and looking back on every 2014 post did teach me some valuable lessons.
For context, here’s the list of every investment idea I wrote about in 2014 (links are to the original post):
|Post Date||Company (Ticker)||Entry/Target Entry Price||Dec 31st/Target Exit Price||Value of $1000 Invested||% Gain|
|Jan. 21||Netflix (NFLX)||328.71||341.61||1,039.24||3.9%|
|Feb. 24||Macy’s (M)||53.06||56.25||1,060.12||6.0%|
|Feb. 26||Target (TGT)||60.49||75.91||1,254.92||25.5%|
|Mar. 28||Restoration Hardware (RH)||71.93||96.01||1,334.77||33.5%|
|Mar. 31||Trina Solar (TSL)||13.51||9.26||685.42||-31.5%|
|Apr. 16||WellCare Health Plans (WCG)||63.56||82.06||1,291.06||29.1%|
|Apr. 21||Facebook (FB)||61.24||78.02||1,274.00||27.4%|
|Apr. 25||Amazon (AMZN)||296.58||310.35||1,046.43||4.6%|
|May 8||JC Penney (JCP)||8.57||6.48||756.13||-24.4%|
|Jul. 7||Apple (AAPL)||93.09||110.38||1,185.73||18.6%|
|Jul. 16||Yahoo (YHOO)||33.79||50.51||1,494.82||49.5%|
|Aug. 11||Luxottica Group (LUX)||52.77||54.47||1,032.22||3.2%|
|Sept. 2||BlackBerry (BBRY)||10.16||10.98||1,080.71||8.1%|
|Sept. 2||Alibaba (BABA)||83||103.94||1,252.29||25.2%|
|Total Blog % Gain||12.8%|
|S&P 500 % Gain (The Market)||11.4%|
Sadly, my personal portfolio did not mirror these blog returns. Why? I don’t treat my portfolio investments the same way I do my blog investments. Going through the list of investments pointed out a few takeaways that I want to use going forward:
1. Hold for the long term
I wrote about this already, but I shifted my investment philosophy to focus on long-term investments rather than short-term trades. Often, the reason my personal portfolio didn’t match these returns is that I didn’t hold the investment until December 31st. This affirmed my commitment to long term-investments.
2. Diversification works
This list of investments is relatively diversified (although it’s tilted to the newer, tech side). Even though I had a few losers in the mix, holding so many different investments kept them from hurting the overall return too much.
3. Do your research
I would never write about an investment that wasn’t well researched and that I wasn’t confident about. But back when I was making shorter term investments, I wouldn’t hold myself the same level of due diligence. From now on, I’m planning to write about every one of my personal investments on the blog. If it’s not good enough for the blog, it’s not good enough for my portfolio.
I found this exercise extremely helpful (and if I’m being totally honest, confidence boosting). You might find it useful to look at the same analysis for your own 2014 portfolio – whether backed by real money or not.