January 3, 2011

My Roth IRA Performance for 2010 = +30.1%

As 2010 has drawn to a close its a convenient time to summarize my financial performance for the year. Today I'll review how well my Roth IRA did in 2010.

I looked at My Roth IRA Performance Compared to Benchmarks back in Feb 2010.   At that time I was up 34.6% from Nov. 2008 to Feb. 2nd 2010.  That was an odd time period and I'm not sure why I decided to look at that 15 month span.  

From 1/1/2010 to 12/31/2010 my Roth IRA investments went up 30.1%.

I think that I did quite well with my investments this year.  Of course it may be entirely dumb luck that my returns are that good.   I'm not about to declare myself a stock wiz and quit my day job.   But whatever the cause I'm happy with the results.

Comparison to benchmarks

Its important to compare your investing results to the general market.   30% sounds great but it wouldn't be very impressive if the S&P 500 was up 40%.  

2010 performance of benchmarks:
S&P 500 = 12.9%
Margaritaville = 10.5%
Dow Jones = 14.5%
NASDAQ = 15.8%

I measured the Dow performance with IYY, the S&P 500 with VFINX. and ONEQ for the NASDAQ index.  Margaritaville is a 33%/33%/33% mix of VIG, VYM and BND.

The 30% return for 2010 in my Roth investments is about double the benchmarks.   I did quite well compared to benchmarks for the year.

My investment strategy

Generally I've used a High Dividend stock strategy for my Roth purchases.  Everything in my Roth account pays a decent dividend and some of them pay fairly high dividends.

I've own some large cap telco stocks with good dividends, some REITs , I own an oil royalty trust and some pharmaceuticals like Bristol-Meyers Squibb.   I've also bought some ETFs that are high dividend index funds.   I sold off my GE after I realized I had no good reason to own it.  I also sold my HOG after it had doubled.

I figure the yield of my holdings probably averages around 5-6%.

Commissions and trading activity

I made 14 trades through the year.    I made 8 purchases and sold 6 positions.   I paid $7 for each trade in commissions.   I use Scottrade for my Roth IRA.  The cost of that is figured in the 30% return.     Commissions can add up if you make a lot of trades and can be a high expense especially if your total investment isn't that great.   You should watch the cost of your commissions for this reason.  If I had made 14 trades at $7 a pop and only had $5000 in the fund that would be pretty bad since that would equate to about 2% expenses.   But for me my balance is high enough that my commission costs are closer to the expense ratio of index funds.. 

Disclaimer :  This is not investing advice and I'm not going to tell you what stocks to buy.  

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