August 21, 2008

Follow up on my UpDown performance

I was pretty pleased when I saw the other day that I was up 5% on Updown for the year. I looked at it again today and right now I'm only up 2.9%. By comparison the S&P 500 is down -4.7% since I started. So I'm 7.6% ahead of the index since March 20th. Thats not bad.

But lets look at the chart to see a little more about how I've done:

My line is blue in the chart and the S&P 500 is green.

Right now I'm a ways ahead of the S&P. But look back at the period from 3/20/08 to around 6/19. In that 3 month period my performance was either below or roughly equal to the S&P. Its only the past 2 months that I've really pulled ahead of the S&P.

So on one hand you can say I'm 7.6% ahead of the S&P. But if you look at it another way you could say: In 5 months I've been outperformed by the S&P 500 about 60% of the time.

The real test will be over a longer term period. How will I do in 12 months or 3 years?

Also comparing my stock picks to the S&P 500 isn't such a great benchmark. Would you dump all your money into the S&P 500? I'd look for a good mutual fund.

For example the Jennison 20/20 Focus Z (PTWZX) mutual fund sold for 13.86 on March 19 and is now selling at 15.49. So they are up 11.7%. CGM Focus (CGMFX) is listed has having the best 1 year returns on the Yahoo site. CGM Focus was going for 46.59 on Mar. 19th but is now down at 45.75 so they are down 1.8%.

Still you could do much worse. Browsing at Yahoo they have a page of mutual funds with the highest loses. Fidelity Select Home Finance (FSVLX) was at 25.92 on March 19th and is now at 16.76. Thats a whopping 35% lost in just 5 months. The fund specializes in mortgage securities and was hit hard by the impact of the sub prime mortgage mess.

One of the funds was Frontier Microcap (FEFPX). Motley Fool has an article calling it the Worlds Most Expensive Mutual Fund. Not only do they have a 4.5% sales load but the expense ratio is at a boggling 18%. What a rip! But I can't find much information on the recent price history of that fund so I'm not really sure its actively traded now.

Of course these last two examples of Fidelity Select Home and Frontier Microcap are the worst case scenarios. Skimming over the Vanguard funds it looks like the median 1 year return is about 4%.

Overall I think my results fall somewhere in the middle if I compare it to mutual funds across the board.

I'm using UpDown as a learning tool. I'll continue to play with my stock picking strategy and see how it plays out for me over the long term. If nothing else its gaining experience but without risking real cash.

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