About 5 years ago after 35 years of investing in stocks, mutual funds, closed end funds and ETFs rated top picks by others I decided I could do a better job myself. I was reading Forbes magazines Best of the Web and decided to take their recommendations. In that issue they recommended Marketocracy as one of the top stock market simulation games and Barchart as one of the easiest stock screeners to use.
Soon my funds were getting green stars from Marketocracy meaning that they were beating at least 75% of the other 100,000 plus portfolios rated by Marketocracy. I begin asking questions in the forums and found the M100 guys -- Those top 100 out of 100,000+ to be very honest and giving of their time. A few even encouraged me to enter a contest sponsored by Marketocracy, MSN Money Central and Investor Place Media called the Strategy Lab Open. The winner of the contest would get a chance to be in a Strategy Lab contest against some real professionals on MSN Money Central. I'm not sure how but I won that contest and began writing articles for Top Stocks.
I have since retired and now write on-line columns on Barchart, MSN Top Stocks, Seeking Alpha, Main Street Investors and my own blog Financial Tides teaching others how to pick and manage their own investments.
This month Marketocracy gave top recognition honors to 3 of my simulated Marketocracy portfolios. They named my Barchart -- Jim Van Meerten Speculative Fund -- (VMSPC) to their M100 . Per their press release: "M100 members have proven long term track records, and serve as the ambassadors of our top performing members. We have thousands of excellent investors who are beating the market, but only 100 make this list at any given time. These members receive many benefits for their participation in the m100, including free premium memberships, posting privileges on our forums, press opportunities, and cash. Marketocracy pays all m100 members based on the assets under management with our affiliate, Marketocracy Capital Management. "
They also compared simulated funds that had been in existence over 5 years against the top 50 mutual funds with 5 year track records. My Barchart -- Jim Van Meerten New High Fund (VMNHI) beat the #10 rated mutual fund, the Alger Speca A (SPECX) rated by Morningstar as a 5 star 5 year pick . My fund was created in March of 2005 and has returned 76.36% since inception beating the S&P 500 return of 10.03% by 66.34%. Annualized results were 11.68% for (VMNHI) vs. 1.88% for the S&P 500 so I beat the benchmark by 9.81%. They also compared my VanMeerten S&P 600 Fund (VMSIX) and found that my return beat the #27 top rated 5 year return of Fidelity's Select Software (FSCSX) and rated by Morningstar as a 5 star 5 year pick, My fund was created in November of 2004 and has returned 71.11% beating the 13.76% return of the S&P500 by 57.35%. The annualized rated of return of 10.44% beat the S&P 500 return of 2.41% by 8.03%.
What have I learned and how can you profit from my experience? When I was being interviewed as a finalist for the Strategy Lab Open Ken Kam made an observation. He said, " You trade a lot of stocks but seem to sell losers right away". I've found that is the key to investing. Learn how to cut your losses and let your profits run. Sounds simple but discipline wins over brains.
In the VMNHI fund:
Best Winners -- Chico's (CHS) 266.42%+ and Panti Computers (PTI) 249.20%+
Worst Losers -- Premcor (PCO) -100.00%- and Epic Energy (EPCC) -57.60%
In the VMSPC fund:
Best Winners -- Aixtron Akteingesellschaft (AIXG) 244.74%+ and Rural/Metro (RURL) 187.56%+
Worst Losers -- Elan Pharma (ELN) 69.26%- and Dollar Thrift Auto (DTG) 68.43% -
Anyone can pick stocks that beat the market. The key is knowing when to get out and preserve your profits. I formerly used a stop loss of 10% but found that too tight. I now use the 50 day moving average and seem comfortable with that. Please share your thoughts on stop losses in the comments section.
I'd like to thank Marketocracy for the recognitions and Barchart for the excellent stock screens.Please join me on my quest to beat the market by reading my blogs on Barchart, Top Stocks, Seeking Alpha, Mainstreet Investors and of course my own blog Financial Tides.
Jim Van Meerten .. To maximise your gains it is important to remember not to be too greedy, before you buy a stock decide on your profit target and once you've achieved it realise a profit by selling the stock, it is almost impossible to exactly catch the top of the market. If your stock goes up in price but then starts to fall back be prepared to reduce your profit target and take the money that is available to you now. http://www.jumpingstocks.com/
ReplyDeleteJim,
ReplyDeleteIt was great to see you say, "Cut your losses and let your profits run", and "The key is knowing when to get out." I learned those from a guy whose philosophy I like, Al Thomas (His book is If It Doesn't Go Up, Don't Buy It! I have no affiliation with him.) Then Anonymous comes along and says not to be too greedy, to decide beforehand how much profit is enough. WHY?!? Let THE MARKET tell you when you've made enough profit; i.e. when the stock stops being profitable. His sentiment really bugs me about people: you spend countless hours researching and choosing what you think are good stocks that are going to appreciate in value, and when they do you sell them too early! A lot of those same people will then hang onto a loser thinking, "It'll come back, stocks always do." No, they always don't. Did you ever think General Motors would be bankrupt?
Trailing stops: interesting point about 10% being too tight. I've generally found that to be the case too (for stocks; I'll run tighter ones on funds and most ETFs). I used to use an 8% stop because Investor's Business Daily recommended it (don't know if they still do), but found I was getting shaken out of good trades. Even at 10% I sometimes still do, so I'm going to research your idea of using the 50DMA as a trailing stop. Do you know what kind of percentage from the high that usually ends up being? Seems like it could allow a pretty healthy dip. What do you think about using 20DMA instead, or maybe a blend of the two?
I just discovered your blog yesterday and have been catching up, trying to learn from you. Congrats on your successes, and thanks for sharing with us.
Mike Donithan