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Author: dgalbraith100 Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8116  
Subject: Re: grrrrr! Date: 12/16/2006 5:44 PM
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i have to rant.......even though 8 of my 10 picks were up (and in some cases substantially) on friday, the s&p still beat me and made me a big loser that day.......how can i be a loser, when if i'd been using real $$$$ i'd be a winner???? grrrr!



I've seen this statement a few times complaining about CAPs and real money, and how normal people don't care what the S&P does. This post is not directed at Sasha, but more a rant of my own... I apologize in advance if offend anybody here.

I have to disagree with those who say it doesn't matter what the S&P does, as long as you make money. I care greatly what the S&P does. If I can't do better than the S&P, then why don't I just put my money into SPY (an ETF that tracks the index)?

If the S&P beat you, then if you had been using real $$$$ you wouldn't be a winner. Guy A invests 10K into 10 investments (a total of $100K). Guy B invests 100K into the S&P. Yesterday, your portfolio shows $101K, you made 1%, good job.

But... the S&P is up 1.1% on the same day, Guy B is up $1100, his portfolio shows $101,100. Who is the winner? Now take that one day and make it one year. If Guy A is up 20K for the year, he made 20% that year, ending with $120,000. This sounds great, he is patting himself on the back calling himself a winner. But, if the S&P is up 21% over the same year, then Guy B made 21K ending his year with $121,000. Who's the real winner? Guy B made more money, and did less work. Think on that one for a bit... :)

Long before CAPs, I have tracked my portfolio against the S&P, and other indexes. If I am not beating them, I need to know why, and decide do I still have the right stocks, and will I eventually come back a winner against the index?

If I am beating the S&P, I also need to decide is it worth the time and effort I am putting in? If I can make 1% more than the S&P, is that enough to spend my time, my energy? I do enjoy the chase, the hunt, the thrill of finding the perfect stock, I also find it stressful, watching the stock go up and down. Is that stress, the work, worth the gain? I'm not as sure as I once was. (but that conversation is best saved for another post :)

So, over the last 5 years have you been beating or losing to the S&P?
http://finance.yahoo.com/q/bc?s=%5EGSPC&t=5y

What about the Russell 2000 index?
http://finance.yahoo.com/q/bc?s=%5ERUT&t=5y

Are you happy with your performance against these indexes? if not then you need to do something different, like just purchase the ETF's that track these indexes, and quit chasing individual stocks.

When you purchase individual stocks, it is very important to monitor how the indexes are doing. You could be wasting your time and effort and making less money.

If you can't beat it, join it. If you are not beating the S&P, then it probably makes more sense for you to put your real $$ into a index fund that tracks the S&P.

Just my opinions,
-d.

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