HELP

Investment Analysis Clubs Saul’s Investing Discussions
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Hi everyone,
I need some help with my portfolio. I’m losing my patience with this market. I started building my positions in late April and May when I discovered this board and began reading Saul and all the other great contributors and liked a lot of what you have discovered. However, as you probably can guess, most of what I have purchased through these few months is going down consistently in the past few weeks. That was probably caused by being a little late to the party. Most of you have already built some gains but now all I have are losses. I still like a lot of what I’m holding but I don’t know how long I should be holding on. Should I be adjusting some of these holdings by selling off some or part of them and watching to repurchase at a later date or just continue holding. I have some gains from some of what I sold earlier in the year so I could use some losses to offset some of those gains for tax purposes. Does that sound logical?
For example here are some of my holdings
AEYE Down 36.8% .58% Of Port.
AFOP Down 24.2% 2.39% of Port.
AIOCF Down 13.9% 5.77% of Port.
BOFI Down 7.04% 5.75% of Port.
PFIE Down 11.82% 4.25% of Port.
SKX Down 11% 2.63% of Port
UBNT Down 18.17% 7.63% of Port.

Even my old standby’s BA, DIS, BMY, TGT are down lately but still profitable so I shouldn’t complain too much. It’s just I went through this before in 2008 and other times but this time, I elected to hold on to everything and ride this out. It’s hard just watching. I always feel that I should be doing something. But I’m not sure what. I’m sure I’m not alone with this problem so I thought I would reach out and see what comes back. If I’m all wet let me know. If you have some suggestions I’m ready and willing to listen. You all have been great and I have already learned a lot from you.
Always listening and reading.
Gayle

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galba,

I think you should think about the companies, not the stocks. If you like the companies and feel they are not outrageously priced, you should hold them or add to them — unless you feel you are a master of market timing and could get out at the right time and then get back in at the right time. (Most people who try doing that fail, because when they get scared enough to want to sell it’s when other people are also scared and selling, and is thus near the bottom).

Just my opinion.

Saul

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I passed a threshold myself today. For the first time (2 years MF investing), I’m under performing the S&P.

At times my returns were 40%. Most recently I went from out performing the S&P (30% Portfolio vs 20% S&P) to 15% portfolio vs 16% S&P in just a few months. I expect small cap growth to outperform during up markets and under perform during down markets, but it’s tough to watch the downside.

I have a few stinkers that I probably should have sold (or never bought): SODA, TCS, WFM. My tendency is to hang tough on these and wait for them to recover, but maybe that’s not the right approach. I should maybe sell the loss and invest in something (what??) with more promise. There is only so much UBNT/BOFI I can buy.

Any general suggestions?

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Gayle, if you sell now you will have locked in a loss. Buying high and selling low is not what you want to do.

Stock markets are crazy. Stock price is meaningless when judging the worth of a company. You are a part-owner of these businesses: how do you feel the businesses are doing? That’s all that matters.

You’ve only been investing in these companies for 6 months or so. It’s a coin toss as to whether a position will be profitable after 6 months or not. In this case, we’re going through a perfectly natural “correction” which happens about once a year on average. Don’t get spooked.

When evaluating how your portfolio is positioned, think about where you think things will be 5 years down the road. Forgetting stock prices, are you happy with the businesses you own? Do you think they’re likely to perform well over the next 5 or more years? Eventually, the stock price will catch up to the performance of the business – it’s just a waiting game.

It’s never fun to see a big chunk of your portfolio in the red. But selling when things drop is the only sure way to lose money. And if anything, the fact that so many companies are down all at once should be a big hint that this drop has nothing to do with the quality of the businesses themselves.

Stock markets are volatile, and small companies are more volatile than large ones. You’re experiencing that volatility right now. If you’re happy with the businesses you own, then you just need to ride this out (or even add to your positions – not trying to time the bottom, as prices may very well keep dropping, but looking at the prices today in terms of where you think the businesses are likely to be years down the road).

Sometimes, too, the best thing you can do is just take a break and ignore your portfolio for a while if you find yourself getting too emotional. There’s nothing wrong with that.

Finally, if you haven’t read it yet, I would recommend buying and reading Markets Never Forget (But People Do) by Ken Fisher. I think it will help you better understand what’s happening right now (and how it’s a perfectly normal and regular part of the market) and what to expect from the market in general. I think it will help you.

Neil

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Neil, Great reply! You said what I had said so much better!
Saul

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I have a few stinkers that I probably should have sold (or never bought): SODA, TCS, WFM.

Hi rhpolk. You know how rarely MF ever sells anything, even if it’s a stinker. Well one of the services (HG) just sold SODA, so maybe that’s a message for you.

Saul

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Gayle … I agree with Saul

Do NOT panic … that is what the market wants you to do … the current fear/greed index approximates a 5 … the market wants you to panic and steal your money

My advice, like Saul, is that if you believe in the fundamentals of the companies you have invested, just button down the hatches and you will weather the storm. The market is testing a bottom (and will go lower) but it will recover like 2008/2009

Have the fortitude to not let the market steal your money

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Hi all,
Thanks to all who responded to my post. They were very helpful.
After writing that post I had a cathartic feeling of simply feeling good about getting it all off my chest. You sit around all day beating yourself up on what to do and that just adds to the frustration. Niel, I really appreciated your post. It reinforced everything that I preach to my wife when she sees the losses going through. I keep telling her that the whole market is falling not just what we are holding. Our companies are still showing positive signs of growth and will weather this storm. So I am aware of all this but just needed the extra support from someone more successful than I am. Even after nearly 20 years of managing my own portfolio I still feel like a beginner when I read posts from you Niel, Saul, Andy, Anirban and so many more. What a great learning experience this has been the past months on this board. I can’t thank you all enough.
Thanks again to all and good luck on our investments.
Gayle
PS Market’s down again. I think I’ll go play golf.

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Neil:

Congratulations - your post was Post of the Day.

http://caps.fool.com/Blogs/the-worst-time-to-sell/1004386

John

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In investing you have to understand your own psychology and invest and structure your portfolio accordingly. (Indexes, Individual Stocks, Div Stocks, Asset Allocation/Reallocation, Bonds, Alternate asset classes, diversification, etc)

The market is not a straight line, it has an upward trend, but its volatile in how it gets there.

Stocks are correlated to the overall market. These are not exact figures, but it used to be like 50% and is now like 75% after the financial crisis.

So when the market goes down, your stocks, for the most part will go down. Generally, small caps and growth stocks have more volatility than large cap consumables companies.

When you buy individual stocks, you are betting you can do better than the overall market.

If you buy when the market is high, your forward returns are less than buying when the market is low.

One technique to help weather downturns, is to keep some cash available, so you can buy some companies at good prices. Nothing worse than something going on sale and you have no money to buy it, or worse yet, panic into selling at the worst time.

You can buy insurance (PUTS) to offset some of your loses (and provide money to invest) during a downturn, but this requires timing the market which is extremely difficult.

Interestingly, one of the best performing categories for people’s investments have been target-date funds, because people tend to invest in them monthly and leave them along. Folks normally don’t make money in mutual funds because the get out when they are low and buy when they are high. Peter Lynch, who had great returns with the Magellan Fund said most of his investors did not make money for this very reason.

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