Read Learning From The Past, Part 1
Photo Credit: PSParrot
Happy New Year to all of my readers. May 2015 be an enriching year for you in all ways, not just money.
This is a series on learning about investing, using my past mistakes as grist for the mill. I have had my share of mistakes, as you will see. The real question is whether you learn from your mistakes, and I can say that I mostly learn from them, but never perfectly.
In the early '90s, I fell in with some newsletter writers that were fairly pessimistic. As such, I did not do the one thing that from my past experience I found I was good at: picking stocks. Long before I had money to invest, I thought it was a lot of fun to curl up with Value Line and look for promising companies. Usually, I did it well.
But I didn't do that in that era. Instead, I populated my portfolio with international stock and bond funds, commodity trading funds, etc., and almost nothing that was based in the USA. I played around with closed-end funds trying to see if I could eke alpha out of the discounts to NAV. (Answer: No.) I also tried shorting badly run companies to make a profit. (I succeeded minimally, but that was the era, not skill.)
I've been using my tax returns from that era to prompt my memory of what I did, and the kindest thing I can say is that I didn't have a consistent strategy, and so my results were poor-to-moderate. I made money, just not much money. I even manged to buy the Japanese equity market on the day that it peaked, and after many months got out with a less-than-deserved 3% loss in dollar terms because of offsetting currency movements.
One thing I did benefit from was learning about a wide number of investing techniques and instruments, which benefited me professionally, because it taught me about the broader context of investing. That said, it cost time, and some of what I learned was marginal.