11 January 2007
Riding that bull
For a change, all my 401(k) investment options paid off decently in 2006; I wound up with an overall return of 8.84 percent. (For those appalled at how much money Goldman Sachs employees made last year, let it be said that the segment that they sub-advised I love that word earned 14.60 percent, which wasn't even the highest return I got.)
For the curious, I am hedged up to here: I'm in a traditional money-market account, a flat-rate account that rolls over every year, a stock-index fund, a large-cap blend fund, and a bond/mortgage fund. I even, yes, Lord help me, it is true, have a few shares of the people who administer all this stuff.
(Remember the generally lousy market of 2001? For the year I was down 0.79 percent. Now that's hedged.)
I have yet to compare notes with our CFO, but I've beaten him five years out of the last six, so I am hopeful. I'm not so confident, though, that I'm willing to offer investment advice, even to Mike.
Update, 9 am: The CFO beat me this year. He said he'd gone after some more aggressive investments this time around. Most everyone, he reports, did fairly well, and no one came out negative.
Posted at 6:28 AM to Common Cents
Yeah, it never seems to change that you want to be invested in aggressive stocks (mostly tech) at the beginning of a cycle, and shift your gains (if not your principal) gradually to, well, Berkshire Hathaway as it loses value.
The trick is, how long does a cycle last? That's what changes.
I've lost a good deal of money investing at the wrong time. I could jump back in and make it back (my history has been making and losing lots of money fast by tracking money flows into/out of stocks... my mistake was deciding to leave it in tech at the wrong time... YOU know WHICH time that was).
But I don't expect to go back into stocks. I don't want to hand my money over to duplicious and wildly overcompensated CEOs who'll spend lavishly and foolishly on things that look pretty in today's annual report but don't yield a lasting return. Four rules govern my investments now: Invest in myself, invest in things I know and understand, invest in areas everyone else has overlooked, invest in things where the competition is seriously hamstrung (for whatever reason).
Bill Gates made his fortune with a product (OS software) no one valued. Its makers essentially handed it to him. IBM refused to buy his stupid company when Gates was ready to bail. Then, seemingly on a dime, the world changed, and containerloads of cash fell into Gates' front yard.
This applies in politics too... in fact, investing IS politics. Winston Churchill held tightly to a minority view that few believed: Hitler was a menace. He was roundly ridiculed. Then, Hitler demonstrated that he was indeed a menace. Power fell into Churchill's ample lap, in amounts he could have gotten no other way (even by invading Poland).
Surprisingly, going out there with this new mindset, overlooked investments that meet basic, enduring needs seem fairly plentiful. I'm considering some now.