12 Apr2010

Regulars of this blog might recall this first post in October 2008 when, just as U.S. and world stock markets appeared to be in a disastrous freefall, Marketman & family decided to pick out a hypothetical portfolio of 10 stocks into which we invested a total of USD200,000 as a learning exercise for the Teen and perhaps other readers of the blog. After one short week, the portfolio was up 6.9%, but in the weeks and months that followed, they were on a wild rollercoaster ride that saw them rise rapidly and fall by as much as 10% as well. After 6 months of elapsed time, the portfolio was up by 11%, or 22% on an annualized basis. At the one year point, in October 2009, the portfolio was up a rather stunning 43%, and in case you thought all stocks were up at that point, the Dow Jones Index was down 4.46% and the NASDAQ was up 9.85% for the same period under review…

At the one year mark, I suggested that one might cash in on their gains, stick the funds into low-yielding deposits or put a down payment on a home in a depressed housing market. But had you continued on with the portfolio, and didn’t make any changes in its composition, you would have a stunning total return of 68% for 18 months! Wow! The hypothetical USD200,000 would now be worth some USD336,000 including dividends and less brokerage fees. Over the exact same 18 month period, the Dow Jones Index was up roughly 30%, while the NASDAQ was up by 49%, so the 10 stock portfolio we picked beat the market averages by a significant margin. Here are the individual stocks and how they did since the original date of purchase:

Apple Computers +175% (Whoa! Incredible. Just incredible.)
Coca-Cola +58% (Must have been all that Diet Coke I consumed…)
Goldman Sachs +99% (A fantastic firm, and from the financial debacle, they were one of the few that called it “right” and emerged from the ashes…)
Boeing Aircraft +72% (An unlikely pick at the cusp of a “recession”, but it has done very well indeed)
CVS +22.5% (A modest gain, but provided diversification, just in case…)
GE -3.5% (Problems at financial unit kept dragging this stock down, but it’s on the mend…)
PLDT +18.6% (The weakest gainer, and it wasn’t because of MVP’s plagiarism…)
Amazon +151% (The Teen’s pick, the second largest GAINER in the portfolio, she picked well, kimosabe…)
Hershey’s +26.6% (Sweet, in both senses of the word, also a Teen pick)
Microsoft +37.9% (Mrs. MM’s pick, but she has since switched to a Mac… :)

Let me reiterate that I am not encouraging you to invest in stocks, I simply did this exercise to show you what can happen if you decide to participate in the stock markets. And most importantly, when you happen to have the guts to place your bets when 9 out of 10 other investors are freaking out and saying it’s the end of the financial system as we know it.

And as an aside, and a serious jab at folks who took me to task for my PIPC posts, compare these stock returns with those who got stuck in that pyramid scheme of sorts… And if I am not mistaken, not one iota of money has been returned to investors caught up in that scam… so my posts on the matter have withstood the test of time as well. If you care to go back and read those posts, click here and here. I do wonder where such adamantly pro-PIPC commenters such as “polypoo” and “Inquirer” are today, and if they finally realize they were in the midst of scam and were essentially defending those who were at the center of it all… Time will tell. It always does…

 

COMMENTS:

  1. Jack Hammer says:

    Bravo MM…however, If I was a CFP, a Certified Financial Planner, I would recommend people put in only 10%-25% of their disposable income in Stocks.

    In my experience, it is best to invest in Good Company Stocks on a monthly Basis, rather than follow the Buy and Hold strategy, as Statistics prove that in the long run over a period of 10 to 15 years, you will have beaten the performance of the Buy and Hold Strategy.

    Its ok if you have Net Worth of USD100 Million, to invest USD10 Million in Stocks and then you dont mind if you lose it all.

    Apr 12, 2010 | 4:08 pm

     
  2. Connie C says:

    Great stock picks MM! Congratulations!

    Jason Zweig, a Wall Street Journal columnist recently wrote that 25** of the top dividend payers in the S&P 500 account for half of its payout, a good argument for investing in individual, high quality, dividend paying stocks. And, from 1983 to year end 2006 if you did not own the 25**of the minority stocks but owned everything else, you would have broken even and made no money whatsoever. Looks like you did even better in your stock pick universe.

    In investing , as we have witnessed the craziness going on in Wall Street, and the booms and busts of the free market economy, one has to know what he/she is doing. For many, it is like playing the roulette, even the majority of actively managed funds underperform the market.

    Apr 12, 2010 | 6:43 pm

     
  3. Mari says:

    Congratulations! I would’ve invested in stocks too if I was more aggressive like you and the family are…. but happy for all of you. It really has been a roller coaster ride with the market.

    Apr 12, 2010 | 8:49 pm

     
  4. Pilar says:

    Congratulations, MM! It just marked the 11000 pts, the highest since Sept 2008.

    Apr 12, 2010 | 10:20 pm

     
  5. Pam says:

    Congratulations, MM! Pardon my ignorance, but how does one buy foreign stocks? I have always been interested in the stock market, esp in investing in some US companies, but no one seems to be giving me a clear answer on how to go about it.

    Apr 14, 2010 | 12:19 pm

     
  6. jon says:

    @Pam, you can open an account with an online broker like schwab, etrade or interactive brokers.

    Apr 15, 2010 | 7:59 pm

     
  7. Issa / You Want to Be Rich says:

    I know that I should have – drat. But I did invest in the Philippine stockmarket (not equivalent to USD$200,000, though) and I am up – I am not really sure by how many percent, but it’s looking like about 20-30%, which is good, since I invested about March 2009, which was one of the lowest points last year. Now, the question is when to pull out. But I am investing in the long haul – maybe 7 years – so 7 years it is. I am just looking for the perfect time to invest more. As it is right now, the prices are so high, I am just waiting for it to fall a bit. Mine’s Ayala, BDO, BPI, Globe, Jollibee, ABS-CBN.

    Apr 16, 2010 | 10:06 am

     
  8. i love sta.rosa says:

    tagalog na lang po.. hehehheheh, gusto ko na talaga bumili ng mutual funds, kaya lang nagdadalawang isip ako kung mutual or phil. stocks ba talaga… pagnatapos ko nang magbasa ng book ni bo sanchez na my maidinvest in stcok exchange.. siguro makakapg decid na ako kung mutual or stocks nga ba… thanks MM for the inspiration… naisip ko lang kung kaya ko nga magpautag ng pera minsan di ako sigurado kung mababyaran ako.. ganun din lang ang naiisp ko sa stocks…

    Apr 16, 2010 | 5:33 pm

     
 

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