Are You Better Off Now Than You Were on Jan 1, 2011?
Laurie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Here is the ride we all went on as investors last year:
An inevitable question when viewing this is "Are you better off now than you were on 1/1/2011?"
At bivio.com, we invite investment clubs to participate in the bivio "Quest For Positive Relative Returns". Our performance benchmark report allows them to compare the rate of return they're achieving to the rate of return they would have achieved if they'd invested in a benchmark investment. On average, the investment clubs participating did a little better than the benchmark of the Vanguard 500 Index Investor Fund (Nasdaq: VFINX) when the market was down and lagged it a bit when the market was up. As would be expected of any population of investors that includes those with experience and those who are just beginning, there is a wide variability in club results.
This shouldn't surprise anyone, I imagine a sample of any group of investors would probably show the same variability.
Being in an investment club is about learning to invest. The goal is to learn to develop a portfolio that will grow better than the general movement of the market.
So, if you go back to the original question of whether you are better off now than on January 1, 2011, you might measure your progress by measuring what you have learned.
Did you learn to lean on the community in August when the bottom fell out and people with experience told you this was a welcome opportunity to buy good quality companies at good prices, not a time to panic?
Did you learn that short term exuberance cannot overcome fundamental business difficulties for companies such as Sysco (NYSE: SYY)?
Did you learn that short term panic should not scare you off from investing in companies enjoying tremendous business success such as Apple (NASDAQ: AAPL)
Or Intuitive Surgical (NASDAQ: ISRG)
Did you learn that well managed companies such as McDonald's (NYSE: MCD) can keep reinventing themselves and running their business profitably even when the business seems as mundane as selling hamburgers?
Did you make progress in learning more about the language of business so you can truly follow companies as an investor, not as a consumer of shares of stock? In our monthly Club Meeting Meeting Presentations we presented educational topics you could discuss in your club meetings such as Diving into Financial Reports, Learning to Project Sales Growth, Net Margin and P/E, Understanding Cash Flow and Goodwill.
Did you end the year feeling good that you made the time to join an investment club and spend some time each month learning more about investing? Learning to invest successfully is not rocket science but it's not a no-brainer either. It takes a regular commitment and it takes making real investments. Exploring the world of finance and business with a group of like-minded friends makes it fun and keeps you motivated to stick with it for the long haul.
Learning to invest is a journey and the journey is the reward. If you learned more about investing during 2011, if you've become less of a spectator and more of a participant, you should feel good about that.
We're looking forward to sharing the journey with you as we move forward into 2012.
Happy New Year to you all!
I am fortunate enough to have owned shares of MCD, AAPL and ISRG during the past year and continue to hold them. I believe that the regular SEC filings made by publicly traded companies are a treasure trove of information and that the more one can become comfortable in reading them, the better investor one can become.