Stocks for the long run

Recently, following the wreckage in the stock market has become a ritual every afternoon at “work.” It’s tough watching the market slide further and further everyday. I began the calendar year with six-figures in my 401k account and the account has gone down close to 50% year to date. To illustrate how bad it has gotten, if I had closed out the account on January 2 and paid all taxes and penalties involved, I would still have more money leftover than what I have now.

I am, however, reminded of something a professor (one who worked in investment banking) I had at UVA said more than ten years ago. He said that the greatest fortunes are often made by doing the exact opposite of what everyone else is doing – buying when everyone is selling and vice versa. Over the past ten years, following this maxim would have cautioned any investor from the speculative frenzy over technology equities in the late 1990s and the real estate craze in the mid 2000s.

It gives me hope today that with the S&P 500 having dropped to where they were in 1997, any investor buying the index today would have an entry point equivalent to having bought during my junior year in college. During my last semester in college and the following summer I invested significantly into Applied Materials, having bought close to 650 shares at a split adjusted price of $7.65. I sold all those shares over the next five years at profits no less than 120%. Applied Materials closed today at a price lower than what it was when I bought my first shares in 1998.

But I realize that getting into the market amidst such volatility is easier said than done. Over the past two months, I have made significant investments into various indexes and individual stocks only to see prices continue to sink. My advice for anyone who is risk adverse but interested in taking advantage of the current market level is to invest in an index mutual funds and to invest only funds that he does not need for at least five (maybe even seven) years. My believe in the efficient market theory and my experience tell me that even when you are right about timing the market, very rarely will your timing be so perfect that you will manage to buy at the very bottom (or sell a the very top).

I am not going to end by saying that me having an MBA makes me better at giving investment advice because recent developments on Wall Street cast doubts into the judgment of many of my fellow degree holders. I will simply point out that during my two years in business school and the ten months of unemployment that followed, I never had to worry about money. Hence proving that not only am I a follower of my own advice but am also a beneficiary of it.

Happy Halloween

I hope you like our new digs here at Blogger. The transition was not as smooth as anticipated. The video clips transferred (with one exception) flawlessly but many of the pictures required further formatting. The biggest problem with the transfer has to do with blog posts that link to other blog posts – while the posts transferred without a problem, the links did not update to reflect the new linked posts on Blogger.

I wish everyone a happy Halloween tomorrow. Those of you in the Chapel Hill area may want to exercise extra caution if you encounter a McCain/Pain yard sign while trick or treating. Apparently the local liberals (that’s almost a redundancy given the political persuasions of the people in this area) have been doing such a good job at targeting the signs that some owners have taken extraordinary measures to protect them.

New URL for this blog

Please redirect your web browsers to http://buckyhoo.blogspot.com. The entirety of this blog will be transferred to that site and future updates will be made there.

 

Let’s keep our fingers crossed that all contents (especially the photos and videos) will transfer smoothly. See you on the other side.

Urgent programming note

I learned recently that AOL Journal will be permanently shutdown as part of AOL’s decision to focus on services that are on the profitable side of its corporate profit and loss statement. Due to that decision, this internet address will cease to function starting November 1.

 

Fortunately the contents of this blog, including pictures, videos, and reader comments, will be migrated over to a new address hosted by Blogger. I have yet to decide when to make the migration because Blogger is still working out some bugs related to the transfer.

 

Unfortunately, it does not look like traffic will automatically be forwarded from the current address (http://journals.aol.com/buckyhoo/UNC/) onto the new one. Therefore when the new address has been determined, I will post it here.

 

Please make sure you check back prior to November 1, when the current address will be permanently disabled, to get the new address. After November 1, you can get the new address by emailing me at buckyhoo AT aol DOT com or by doing a Google Blog Search for buckyhoo.

 

Thanks for your patience. I know I have not been the most diligent blogger of late but I do appreciate the readers who continue to check back periodically.

"You really went down the toilet on that ugly b*tch"

Right before I left "work" today, I looked at the stock market to assess the wreckage on Wall Street. For some reason, regardless of how bad things get, quoting my favorite movie always makes me feel better.

Woman marries manger

Once a resume coach talk told me about the importance of not completely relying on Microsoft Word’s spell checker to spell check my resume. He said “you’d be surprised how many people have worked as a senior manger.”

I came across one such person today in the Wall Street Journal. He works for Consolidated Edison and his wife has just celebrated her fiftieth birthday.

Reversal of fortune

I apologize for having been delinquent in my blogging activities. For the past two weeks I had been so caught up in following the events of the Democrat and Republican National Conventions that I have had little time for everything else.

 

Earlier today when I was at “work,” I logged into my Roth IRA account. I was pleasantly surprised to see that the position I took last summer in the Panera Bread Company had hit my target sell price and was sold in accordance to my limit order. This was particularly good news considering that two months after I bought the stock, I blogged about not liking the direction it had gone, especially in comparison to Chipotle Mexican Grill. In the months since that blog posting, both stocks continued their trajectories. But eventually Panera staged a comeback and looking back, it was a smart move to choose Panera over Chipotle.

 

Goes to show that I am still pretty screwed about predicting financial instruments, my Tim Pawlenty prediction (previous post) notwithstanding.