Now that the year is done it is time to evaluate how my investment for the last year has performed. Even though at the start of the year I wanted to actively invest I only made about 10 trades for the entire year.
For about 3/4 of the year I held onto two of the investments I had bought earlier in the year. They were both good picks, however I had only invested about 17% of my money in these two securities. The picks were ENB and IFC . They returned about 28% and 11% respectively. I wish I had put more money in these two picks! Another pick AL – I still have it, and it has returned 20% since I bought it. Another pick I wish I had put more money in. Lesson 1 – Invest significantly when confidence level in a pick is high.
I also invested in LNKD after Microsoft bought LNKD and it was trading below the price it was bought at. The discount in price was due to the time the buyout will take to finalize and concerns over regulators for the merger. My gain was only about 2% . I need to target a higher return as an entry criteria in a position. Lesson 2 – Invest in companies whose return potential is over 10% in an investing period of an year.
Gold Investing – NEM and Eldorado Gold. Made about 3 to 4 % per transaction in multiple transactions in relatively short time period . Gold based companies have had swings in the range of 5% in single days toward the end of the year. Taking profits is a good idea , however my goal was to keep 5% of the portfolio in Gold at all times. Lesson 3 – Stick to principals set at the start unless the principles need to be changed.
BKD – This is my biggest loser for 2016 ! It has declined about 20% from the initial purchase price ! I base my picks based on research reports, analyst recommendations, and my evaluation of the reports . Most of my evaluation is qualitative based on my knowledge and experience. I need to add some hard quantitative metrics such as specific debt to equity ratio, CF growth etc . Lesson 4 – Add quantitative metrics and technical indicators for triggering a buy/sell in a security.
IFC – I had bought IFC as a defensive pick and it has done very well for me in 2016. It provided a return of 14% in capital gains and dividends , and I am still holding on to it. I held a large percentage of my account in cash for most of last year. I need to invest my cash into companies like IFC. Stocks with good fundamentals that are expected to not fall by much when the market takes a beating (defensive stocks) and has a decent dividend ( 4% or higher). Lesson 5 – Cash position in portfolio should be less than 10% unless there are concerns about the markets.
- S & P 500 returned 11.96% for 2016
- NASDAQ returned 7.5% for 2016
- TSX returned 17.5 % for 2016
- My return was 8% for 2016
I would have done better if I had invested in an index fund following S & P or TSX. One of the main reasons for a lower return is because my money was largely in cash for a large part of the year. My biggest lesson is to be an active investor and constantly evaluate performance ! Hoping for a better return in 2017 !