If you don't track your investing, you should not be investing.
Detailing and tracking your investments enables you to do two important things:
- Measure your success; and
- Make improvements
Measure your success
Tracking your progress is vital because if you can't beat the market – buy an index fund, ETF or get expert advice to outsource your stock picking.
Indeed, if you cannot outperform the market over, say, three years it's imperative you consider outsourcing your stock picking. For example, it costs 0.07% to own the iShares S&P 500 ETF (ASX: IVV) and it's returned an average of 20.91% over five years and 7.65% over 10 years.
That's right, for all those 200-page annual reports and sleepless nights; you could've just spent 0.07% (probably less than you spent on buying and selling shares) and taken your 20% return each year. Of course, there's no guarantee that'll happen again – but you never know!
Make improvements
2015 was the worst year for my personal share portfolio. My portfolio returned 8.05%, which I consider very lacklustre. Of course, it outdid the market by around 5.7%, but I made some mistakes that cost me dearly. Maybe I should buy the S&P 500 ETF! Believe me, I'm considering it — I already own a couple ETFs in my family's portfolio.
My portfolio was brought down by a few terrible investment decisions. I can only say this because I tracked my portfolio. G8 Education Ltd (ASX: GEM) was a mistake. I was myopic and made an emotional sell decision with the losses of Slater & Gordon (see below) fresh in my memory. My warrants on Computershare Limited (ASX: CPU) cost me dearly, so too did my Coca-Cola Amatil Ltd (ASX: CCL) warrants. Accounting for most of the losses, however, was Senex Energy Ltd (ASX: SXY). Like my investment in Rio Tinto Limited (ASX: RIO) before it, my returns were walloped by plunging commodity prices — yet again. All investments considered, my losses on Senex Energy accounted for 38% of my capital losses, which I think says as much for my capital allocation as it does my stock research.
Slater & Gordon Limited (ASX: SGH) was the biggest wealth destroyer for my family's portfolio, falling 87% for the year. Fortunately, I didn't stick around to experience the full 87% collapse. Even still, it was painful for more reasons than the dollar value.
One of my key takeaways from my experience with G8 Education and Slater & Gordon is that I now believe I should avoid investing in services that do not add much value when corporatised. For example, does a law firm or childcare centre become meaningfully more valuable when it's combined with one, two or three others? A year ago, I thought it did.
Woolworths Limited (ASX: WOW) was also a downer. I'm starting to think I overestimated its ability to turn its fortunes around after years of managerial complacency.
Spilt milk
I wouldn't be an investor if I didn't cry over spilt milk and contemplate the 'what-ifs'. I made a capital gain on shares of Netcomm Wireless Ltd (ASX: NTC) in early 2015 when I sold out for 55 cents after buying at 42 cents. Eight months later and Netcomm is trading at $2.93 – 600% more than the price I sold it at.
4 investing resolutions for 2016
In the year ahead, I've decided to make four resolutions:
- Invest more overseas, especially in US markets.
- Focus on investing regularly, before bills, dinners and all other monthly expenses. Whether it's $20 or $20,000 it doesn't matter – every bit counts.
- Invest in myself. I recently took the plunge to make myself a level I Certified Financial Analyst (CFA) candidate (wish me luck!), but reading more investing books from greats like Buffett, Lynch and Munger is important; and mastering my behaviour is imperative. I also need to teach myself to avoid investing envy.
- Stay WITHIN my circle of competence, including avoiding resources stocks.
Foolish takeaway
My investing experience of 2015 has been one of learning. Indeed, my investing performance was (meaningfully) below my annual average. However, I'd much rather learn these lessons now, with more time and less capital at play, then 10 or 20 years from now.
Here's to a happy and profitable 2016!
