Well, it’s the end of the trading year and it’s time for me to review how well I did on the stock market in 2011. I crunched the numbers today and here’s how I did:
Okay.
But that’s alright. It wasn’t a great year for anyone on the market:
US Stocks – the US Stock market, as measured by the S&P-500 (not the Dow Jones, which is useless) was flat on the year. It was up 0% (not a typo). The Nasdaq, which contains newer stocks and more tech stocks, was down -1.8%. Pretty flat.
Europe – Europe discovered it has a serious financial problem on its hands and was down –14% this year.
Far East – The far east doesn’t have the same financial problems as Europe, but their stocks did worse and they were down –17% this year.
Emerging Markets – To check this, I use Vanguard’s emerging markets ETF. It is made up of China, Korea, Brazil, Taiwan, South Africa, Russia, India and Mexico for 85% of its countries. So, there is a little overlap with this one and the Far East. Unfortunately, this group of countries was a disaster, down –21%.
Thus, after lagging everyone for years, the US outperformed nearly every other country, and did so easily.
When I compare my performance, I compare myself relative to everyone else. How did I do compared to everyone else? First of all, I pick a benchmark. Because I invest globally, I pick an index that invests globally and the one I use is the iShares ACWI (all countries in the world index). Here’s how I did against the various benchmarks:
Against the ACWI – I beat ACWI by 7.8%, excluding dividends.
Against the S&P-500 (most common measure of the US market) – I underperformed by –2.0%, thanks to my exposure to Europe and emerging markets.
Against the Nasdaq – I underperformed by 0.2%, which is almost (but not quite) a tie.
Now, comparing myself against the US market is a little unfair because the foreign stocks dragged me down and normally I would never trade foreign stocks. How did I do against the US markets excluding my foreign positions? This includes my passive portfolio, my trades in my personal account and my trades in my Roth IRA.
Against the S&P-500 – I beat the S&P-500 by 7.8%.
Against the Nasdaq – I beat the Nasdaq by 9.6%.
That’s pretty good, I’d say that I am pleased with my performance this years (especially since I beat my benchmark by a good amount). I haven’t included dividends.
However, there’s still one more important question. How did I do against the Dave Ramsey portfolio? To check that, I included all of the dividends that I got and then back and added all of the dividends to a portfolio that he recommends using passive indexes using Google Finance.
Against Dave Ramsey – I beat the Dave Ramsey portfolio by 4.8%, including dividends. This was the most important one because I lost (by a lot) in 2010 and 2009.
There we go. Much of my outperformance was accomplished by getting out of the market before all of my gains were erased as it crashed in the middle part of the year, and then not doing anything during that time period. I just blindly followed my lazy strategy and rebalanced everything, collecting dividends.
I can definitely outperform the market by a wide margin when it is going up but when it is down I give up most of my gains. I do this every time… except this year when I only gave up part of them. Granted, it was a big part but at least it was everything.
Maybe I am getting better at this.