How To Make A Lot Of Money In The Stock Market And Still Feel Like A Loser
Slow and steady often wins the race.
On May 5, 2013 I wrote an article called, “Should I Invest In China? A Top Down And Bottoms Up Perspective.” My simple thesis was that with the Yen depreciating to 100+ due to Abenomics coupled with strong world markets, China must inevitably catch up in a risk-on environment. I then identified the Chinese internet space as the most laggard sector where investors should consider putting money to work. Chinese internet stocks have been going straight down for two years. Stock picks included BIDU, SINA, and RENN.
So what happened with the stock picks since then? And more importantly, did I put my money where my mouth is or was I just pontificating like some useless Wall St. research analyst does with Neutral/Hold/Wait And See ratings? I hope you know by now that I don’t like wasting time writing about things I don’t know or care to act upon. Of course I invested in my thesis. I just didn’t invest enough.
Almost like magic, every single name ramped higher by 15-25% within three weeks after publication while the broader markets climbed 2%. It was almost as if someone got a hold of my article and forwarded it around, causing a buying frenzy. If there’s a chance this is true, is there any wonder why hedge funds keep their holdings as close to their chests as possible?
Since publishing my post on China, my IRA grew by roughly $40,000. Sounds OK right? Not really since I started off with $400,000 at the end of April. I will usually take a 10% gain for the full year any day. However, a 10% gain is a 5-15% underperformance of my stock picks, equating to roughly $20,000 to $60,000 in money left on the table.
So what the hell happened to cause such a leakage in performance you ask? Ill-timed accumulation and exiting of positions as well as FEAR. Remember, I am the King of bad trades. The below chart shows the value of my IRA portfolio today. The pending activity is pending cash as a result of $209,913 worth of stock sales as I’m continuously worried about a market correction. I already sold $168,006 worth of stock several days earlier. At the same time, I’m not willing to place massive short bets either because the market is being artificially propped up by the Fed.
IRA portfolio 5/22/13
Sell too soon. Buy too early. Sound familiar? Welcome to the club. I am the King of making suboptimal trades due to fear and greed. Whenever I’m about to make a trade, I begin to have delusions thinking I’m smarter than the market. After all, I need to have conviction if I’m going to put tens or hundreds of thousands of dollars to work.
When I first began investing in college with the money I earned from 
The two week vacation to Hawaii was perfect except for one thing. My financial advisor from Citibank failed to call me the day a particular deal was closing as previously discussed. This investment offered between a 15% to 20% guaranteed return on the Dow Jones over four years if the Dow closes above the initial strike price plus any upside beyond the guarantee and a 10% downside buffer. I wanted to know whether the guaranteed return was 15%, 16%, 17%, 18%, 19%, or 20% to determine how much to invest. I already made up my mind that I would lob anywhere between $20,000 – $30,000 into this note.
The stock markets surged to new highs on May 3, 2013 in large part because the Labor Department said the economy added 165,000 jobs in April, 15,000 more than consensus expectations. 15,000 is a rounding error in a nation of millions, but we’ll take it if we can see billions more wealth created!
The Nikkei 225 (Japan’s major index) is up over 60% since the election of Prime Minister Shinzo Abe on September 26, 2012. Abe has vowed to re-inflate the lagging Japanese economy with a target inflation of 2% through aggressive quantitative easing, setting negative real interest rates, and aggressive fiscal stimulus. So far, investors are in full belief of “Abenomics.”
