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Fidelity's new tool



April 17, 2014 – Comments (9)

Fidelity just added a new tool that's sort of scary.  It's something I've tried to emulate for years with Excel spreadsheets but with little success.  They have tracked every contribution to each account I hold there for the life of my accounts, and allowed me to evaluate returns like I would evaluate any other mutual fund - on an absolute or annualized % return basis, time-weighted for the contributions made midyear, for 1-year, 3-year, 5-year, and life-of-fund.

For the roughly 9 years I've been actively investing - and you can track my thoughts in this blog for most of that time - a passive investment in the S+P 500 would have returned a 6.94% annualized rate.  My own active management has returned 11.47%.

I'm not dissatisfied with this - if you look at how people and even fund managers do on average, you'd have to conclude I've done quite well in a challenging time - but honestly, I am not convinced that what I've done have been the *right* things.  I've market-timed, panicked out of positions that went on to pull ten-baggers, held outsize positions as they went down to zero (you hear me, GM?), had inadequate sector, geographic and investment-type diversifications/allocations for most of the period, and have had outsize investments in very high-beta names.  In other words, I've taken a lot of risk to eke out that extra 5.5%.  Spent a lot of time on it too, although it's mostly been educational and enjoyable.

This year, I'm nearly tripling my anticipated contributions to investment accounts, and most of the excess is going into a new plan:  a Vanguard target date fund on a monthly-contribution, dollar-cost-averaging kind of way - even though I think the equity markets are over fair value.  My actively managed account is still sitting in cash because I don't see much in the way of enticing prospects at this time; but I am getting older, have less time for the investing game, less interest in it, and am starting to wonder whether or not I should just give it up and let the wonders of low-expense passive index investing do the work for me.  Quit while I'm ahead, if you will.

I know a lot of folks read this blog.  Any thoughts?  


9 Comments – Post Your Own

#1) On April 17, 2014 at 5:07 PM, ThisIsFor2053 (30.56) wrote:

I'm young, and I've already experienced many of the downfalls of stock picking (bad diversification, having an out-sized, risky position take a huge tumble).  I'm starting to wonder if the amount of time that I spend trying to learn about the stock market is even worth it.

I will likely be selling my individual picks over time when I feel that there is a good opportunity to, and will bleed that money into low cost ETFs.  In the end, I think that if I can find a more useful way of spending the time that I spend right now researching stocks and such, then I can make money in that time and passively invest it.

I will always have a few highly speculative picks just for the fun of the game.  But I've really just spent a lot of time so far learning that I'm not very good at this.

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#2) On April 17, 2014 at 7:01 PM, valuemoney (< 20) wrote:

Ummm....math tells me you should actively manage your money! The difference between the annualized average gain is HUGE if you ask me. Simply run the numbers. If you can beat the market by 5% a year that's pretty dare good over a 9 year period. Just make sure it is figured right.

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#3) On April 17, 2014 at 7:19 PM, valuemoney (< 20) wrote:

Example: 10 year period starting with 50k and adding 5k each year to the account which are all reasonable numbers.

6.94% annualized = $166,664 

11% annualized = $233,624

I don't know but I would like to eke out the extra $67,000! 

It is about an extra 40% on your monies over a ten year period. Now do it for 20 years!  

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#4) On April 17, 2014 at 7:25 PM, valuemoney (< 20) wrote:

Sorry that was 11.47% 

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#5) On April 17, 2014 at 8:17 PM, valuemoney (< 20) wrote:

20 years btw if no one wants to do the math

395k vs 777.5k almost double your money 

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#6) On April 17, 2014 at 9:06 PM, dragonLZ (90.90) wrote:

value, thanks for doing the math for us. I was wondering about the same thing (how much better is ikkyu doing in $$ vs. the market), but was too lazy to do the math.

Btw., even without the math, one could tell by ikkyu's CAPS picks and blog posts that he should stick with the stock picking vs. passive index investing.

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#7) On April 17, 2014 at 9:31 PM, valuemoney (< 20) wrote:


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#8) On April 18, 2014 at 12:42 AM, valuemoney (< 20) wrote:

One thing most could do and this is only a thought.

If you put 50% of your money into the passive index fund that tracks the S&P put 25% in BRK.B if it trades under 1.3x book (too be sure it will outperform the S&P in my oppinion) then you have 25% left. If you choose 5 stocks which if you have to put your BEST 5 ideas forward which isn't asking a lot in my mind. It will make up the rest of your 25%. When the market gets WAY overvalued in your mind hold 10% in cash. Or if you are looking to start withdrawing monies. Have a list of 25 of you best equities. I think at any given time you could spot 5 or less names trading at a discount to the market. Your five or less picks would be easy to monitor with little effort. Plus if you screw up it wouldn't be a bit hit. I think if one did that it would be easy to get at least 2 more % points a year on the market. 2% a year is huge over time. With those picks..... before you pick them plan on holding them forever. Don't sell because they go up. Sell only if they get WILDLY overvalued. If you are only looking at 5 companies it should be rather easy to tell. One exception. If one of the 25 gets undervalued to the point you think it is a lot better than ONE of the ones you own, pick it.

Berkshire is huge with some of the best money managers in the world. I think year over year it should beat the S&P by 4%  on average year over year. Then you just need 5 picks that make up 5% of you portf. each to out perform the market by 4% each. Which ain't asking a lot. Then you beat the S&P by 2% year over year with little risk. I am guessing if you put your best 5 ideas forward you will beat it by more.

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#9) On April 21, 2014 at 2:05 AM, awallejr (37.91) wrote:

I dunno you guys are nuts.  If you just search for yield and keep adding you will do fine over time.  The younger you are the better.

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