Tuesday, June 25, 2013

Getting Right to the Point

I've been thinking a lot about this.  This is the post in which I get to the point about this managing-your-own-investments crusade that I'm apparently on.

This turns out to be a surprisingly humbling enterprise, but here goes...

One more preliminary bit of business, because I'm sure you're wondering, How does my portfolio perform?  Okay, I'll tell you.

My 401k's 1-year return has been +14.38 percent to date.

I  inherited an IRA when my father passed away.  I tend to focus more time and energy on that account--maybe because it has more money in it, or maybe because it was my father's money and so I feel a greater weight of responsibility for managing it well.

Interestingly, for all my excessive ministrations, the inherited IRA account's one-year return has been +8.26%.  Not as good as the 401k, but still not too bad.

I'm not saying you'll get rich. I'm saying, you can do just fine managing your money yourself.

One Little Personal Anecdote Before I Explain My Investment Management Methods 
(which methods will not make for interesting reading in any event)

When my dad's IRA account came to me, it was being managed by a friend of my dad's who worked in a branch of a very large and recognizable financial institution.  Out of loyalty to my dad's friend, I won't name names.  Let's call her Ma'am.

While my dad was alive, we had dinner at Ma'am's house once.  Super nice house by the ocean, and she was very gracious.  After my dad died, I appreciated that personal connection she had to my father.  Ma'am was from my dad's generation.  They both enjoyed sailing.  I found this comforting.

After my dad died suddenly, I was in no shape to scrutinize my portfolio for quite some time.  But once I started to analyze it, I became a fairly nightmarish client--you know, the interfering type who calls way too frequently and asks too many questions.

Ma'am, this very nice family friend, was very patient with me and generous with her time.  However, listening to her talk about portfolios and funds was the auditory equivalent of receiving a printed statement from her financial institution--which statements were printed in 8-point type, single spaced.  Picture one of those on-line you-agree-to text box contracts reduced to 35% and printed horizontally on both sides of a sheet of legal paper.  

If one of these multi-page statements were tossed down a flight of stairs, you would never be able to put them back into the correct sequence again.  Nor would you bother trying.

My point was that, try as I might, I could not understand Ma'am.  She might as well have been speaking Sumerian.  Along with all of this blah, blah, blah; I'd get a pile glossy file folders crammed full of inscrutable material to look over.  

New as this all was to me, I had already had the experience of managing my own 401k through the Fidelity website.  As I mentioned in my earlier post, Fidelity somehow manages to communicate about the same world  in a way that my lowly "reasonable person" level of investment savvy can understand. 

Now, sure, this was still during the recession--20010 and 2011.  As Ma'am kept reminding me, no one was doing well then, and once Syria inevitably gained its freedom, it would become rabidly thirsty for Starbucks-- then my international mutual fund in the Middle East would set me up!

Scratching my head, I compared how my own naive stock picks were doing in my 401k, as compared to the professionals' esoteric panoply of funds in my dad's IRA. 

I had Amazon.  It was up about 67%.  Ebay. Up 33%.  Apple.  Up, I dunno, 120% or more.  

I didn't know how long Dad's portfolio had been in place, but I knew that he had been trying to gradually wrest control of his accounts from Ma'am before died.  He just didn't quite have the heart to take it away from his friend.  And then he died.  And I got Ma'am.

Long story short, after two years of watching that portfolio hemorrhage pitifully, I finally concluded that I was comfortable with their margin of error and it was time for me to take over.  I would almost certainly not do worse than Ma'am, and maybe I could even staunch the bleeding.

For weeks, I postponed taking that account away from Ma'am.  It was like breaking up with someone you'd been living with for two years.  We had a commitment, didn't we?  An understanding?   I dreaded doing it. 

I called Fidelity first.  They were all like, "Oh, hey! We can take care of transferring those accounts for you, no problem."  

Apparently, you can leave one financial institution for another without leaving so much as a note.  

I did email Ma'am out of respect for her friendship with my father.  I tried to frame it in a way that would not sound accusatory.  I simply wanted to consolidate my accounts, etc., (and manage them myself).  

She called my cell.  She implied that I was going to take all the cash and blow it on ice cream.  Because I was a fat and ungrateful little beast (implied).  

I never looked back.  Not once.  I've been handling this money now for two years.  That's not long, I know, but I'm doing okay.

So!, if you're interested, and because I've been leading up to this jump-off point for three posts, I'll share the boring details of my investments theory and practice.

In the next post.  It's 12:50 am.  Good grief!  

Good night.  

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