I was reading an article today about some of Jim Cramer's stock picks. At the bottom I saw "Jim Cramer was up 31% in 2009." Article can be found here: http://seekingalpha.com/article/230747-cramer-s-stop-trading-the-right-metric-for-apple-10-18-10?source=yahoo
I thought to myself wow he did pretty good in 2009. Then I decided to calculate my own portfolio return for the year. Turns out not only did I do better than him but i pretty much kicked Jim Cramer's ass.
My stock portfolio for the year of 2009 got a return of 57.5%. How did it do so much better than him? Well first off I think I know that I threw larger percentages of money into "riskier" investment choices that had been beaten down at the time, including steel (X), oil tanker frontline (FRO), and a real estate investment trust (FRESX). Secondly, I didn't do a crapload of trading. When you make trades on a daily or even weekly basis you eat up your gains with all the commissions and fees. Now I'm sure Jim is doing much larger trades so the commissions are probably pretty negligible but for me $8 to buy and another $8 to sell each position really does add up over time.
In this case I'd have to say the Warren Buffett inside of me kicked in. I bought when others were fearful. The idea is to buy low and sell high. When others were selling low (to cut their losses) they were missing out on huge potential future gains. An adjustment here and there is always going to be necessary when the market makes big moves (either up or down) but if you don't have the right balance to begin with you're going to screw yourself over should the market crash.
I don't see myself making 57.5% this year but I'm definitely hoping to be in the 20%+ range.