17 Oct2008

The hypothetical $200,000 portfolio purchased last Friday, October 9, 2008 comprised 10 stocks. On Monday, I thought we were brilliant as the Dow Jones Index soared to one of its biggest one-day gains EVER, at 11+%. That was followed by a euphoric rise in Japan on Tuesday at 14%. But the Dow retreated on Tuesday, then PLUNGED horribly on Wednesday and I was feeling a bit of whiplash. It recovered some of the losses yesterday, Thursday, in New York and I checked on the MM portfolio first thing this morning…

Marketman’s 5 picks, at $20,000 each are now worth:

Apple $23,129
Coke $24,714
Goldman Sachs $24,953
Boeing $ 21,320
CVS $18,503

Total Value MM $112,619

Mrs. MM and The Teen’s 5 picks at $20,000 each:

General Electric $20,924
PLDT $20,063
Amazon $17,954
Hershey $20,228
Microsoft 21,989

Total Mrs. MM and the Teen $101,158

Total for 10 stocks, $213,777.

It’s absolutely early goings, and the floor could still fall out from under before it rises again, but if you had a weak constitution, you could sell out first thing Friday morning New York time, just a week after entering the market, and the total gross return would be $13,777 or 6.9% for one week’s time. NOT BAD at all, if you ask me. Of course you would have to remove broker’s fees, a percent or so. If you then stuck your money in a time deposit earning just say 4% for the rest of the next year, then your total annual return would be 10-11%. But let’s stick with the stocks for several years, make this a long term example… Other points to be taken from this tiny example… 8 out of 10 stocks picked ROSE despite the volatile past week. Some stocks, like Goldman Sachs or Coke rose by more than 20% in one week and if you had only purchased those, you would be dancing right now. Mrs. MM and The Teen picked four stocks that went up, and one that went down, but they had more modest increases than Marketman’s. But the stock market is not for uninformed or risk-averse investors. Best to understand it, learn how it works, follow some stocks you might like and see how far your instincts take you. For me, this is just a game… but duhhh, if I really DID put my money where my mouth was on Coke last Friday, we could have had a lechon EACH during the eyeball… heeheehee. :)

Warning: Marketman is NOT encouraging or endorsing the global stock markets as an investment option for you, I am just playing a hypothetical game to teach The Teen and perhaps some of you, if interested, how the stock markets work.

 

COMMENTS:

  1. witsandnuts says:

    It’s really a rollercoaster ride. I only have a few but I keep on predicting/guessing each day. My Indian officemates are so panicky nowadays. Checking the stock market now and then.

    Oct 17, 2008 | 11:43 am

     
  2. deirdregurl says:

    you have been helpful, indeed! when i read it on books and papers it sounds really complicated. yours was easier to digest! many thanks!

    Oct 17, 2008 | 12:11 pm

     
  3. Mel says:

    From Warren Buffet:”A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”

    Oct 17, 2008 | 2:31 pm

     
  4. marcial bonifacio says:

    You provide both the sophisticated investor and the financial beginner priceless and accessible wisdom not from theories of the Ivory Tower or wannabe analysts.

    Kindly do continue to share to the average investor your perspectives and priceless wisdom on investing.

    Oct 17, 2008 | 3:55 pm

     
  5. eej says:

    The stock market is not for the faint of heart. It is volatile, cyclical and intended for longterm investment. Don’t panic, all you have to do is ride it out and let the market correct itself.

    I’ve learned the hard way from the dotcom bust to not micromanage but let the downturn take its course. However, this is the time to snatch the blue chips while it sits at the rocky bottom.

    Oct 17, 2008 | 8:32 pm

     
  6. pelikula76 says:

    Hi MM,

    After reading your Stock Market Post, I joined in the fun by playing Virtual stock exchange at vse.marketwatch.com After a week of ups and downs, my investment of $1million is up by +7.40 % holdings in Coke, yahoo, Apple and some oil companies. the week has taught me so much about how volatile this business is. Hehehe fun though as long as its virtual cash…

    Oct 17, 2008 | 9:09 pm

     
  7. paoix says:

    it’s definitely been crazy times these last couple of days. no sector is safe. it’s up and down and just hold on to your seat :)

    Oct 17, 2008 | 9:24 pm

     
  8. britelite says:

    We are learning–we are learning MM–continue the lessons please….

    Oct 17, 2008 | 11:10 pm

     
  9. Mila says:

    Where will you lodge all the financial posts? Including a few of the rants and the post/s about housing? MM Academy (teaches cooking, buying, dieting, flower arrangement, and financial know-how)!

    Oct 18, 2008 | 7:50 am

     
  10. lee says:

    what about stockmarketmanila

    Oct 18, 2008 | 8:56 am

     
  11. Edwin D. says:

    Stockmarket is not a gameis a way of life. It is all fine and dandy for teaching the teen but do not treat it as a play thing. Peoples lives play a part on this.

    Oct 18, 2008 | 2:58 pm

     
  12. Marketman says:

    Edwin D., the sample portfolio is IN FACT played like a game, that is how it is often taught in business schools, you can check at the business school at your own esteemed university… Simulations without actual losses is the best way to learn something new. In fact, it would be like learning how to drive a vehicle on a video game with steering wheel and gear shifts and pedals before you ever got behind the wheel of a car. The stockmarket is NOT a way of life if you chose not to participate in it, and the vast majority of Filipinos DO NOT in fact participate in the stock market either directly or peripherally through mutual funds or retirement funds. The stockmarket is only one of several broad categories of investment options such as bonds, deposits, precious metals, artwork, etc. I’m not sure I understand what you mean by “peoples lives play a part on this…” and how my little simulation would in any way affect people invested in the stock market… Lee, nice name… and believe it or not, it is available still! Mila, not sure, maybe I should start a new cateogory… Pelikula, yes, you did well, but as I have said above, it can go into negative territory quite quickly, so it isn’t for the fainthearted or uninformed.

    Oct 18, 2008 | 5:06 pm

     
  13. greasemonkey says:

    if there s something i enjoy more than food, it s (no, not money..) playing games! hahaha! card games, board games, strategy, word, puzzle, role playing, trivia, tv show based, movie based, browser based, text based, pen and paper, flash/shockwave, pc, console, and on and on ad infinitum. to return to the topic, some games i suggest for the teen are: the game of life, monopoly (everybody’s favorite! i so want to get the star wars version..), maxi bourse (well, it’s about stocks but it’s a bit tedious.. the teen might e better off with a fantasy bourse game online), chess (seductively sublime), and cashflow (if i had played cashflow before college, i might ve chosen a different major..). =) later

    Oct 18, 2008 | 11:04 pm

     
  14. chi says:

    What? No Bershire Hathaway shares? Warren Buffet only has 2 investment rules: 1) Never lose money 2) Never forget rule #1 …

    Oct 19, 2008 | 7:56 am

     
  15. Marketman says:

    Edwin D, see this link to see what I mean by teaching by playing… I hate to say it, but, “I told you so…”
    Inquirer article, October 20, 2008.

    Oct 20, 2008 | 11:29 am

     
  16. tups says:

    Running a simulation is an excellent means to learn the fundamentals. It is also a cheap (not free as you invest time as well) way to experiment with investment style and other technical aspects of risk management (e.g. cut-loss levels, leverage and risk tolerance). MM, I honestly believe showing your readers the basics of simulation is an excellent means of introducing Filipinos to our capital markets that still lack significant domestic participation.

    However, especially with regard to a more aggressive trading portfolio, no simulation will approximate the real deal. Investor psychology plays a huge part – it gets a bit dicey to implement trading plans when real money is on the line. Unless you have nerves of steel and can execute like a machine.

    As I wrote in another thread, I am out of the equity markets. The only thing in my portfolio is the property that I bought and cash. As I have never been a fan of the long term strategy and tend to believe sustainable absolute returns do exist, I tend to cycle my portfolio. I am currently learning to trade currencies online. While doing well on the practice accounts, it will still take some time for me before I take the plunge. I have read too many stories of hubris leading to portfolio wipe-outs. I have done quite well in the domestic equity market but going into another market is a whole different ball game. I wish everyone well during these times.

    Oct 21, 2008 | 11:16 am

     
 

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