Earlier this summer I found $35,000.
It was in a brown envelope, in a ditch, about a mile from my parent’s place.
OK, I made part of that story up.
The only thing I’ve found in a ditch recently was a currently valid Platinum Visa card belonging to a certain Tong Wah Tay. It was across the street from the condominium estate where I live in Singapore. Like a good boy, I called the number on the back of the card last night and had the thing cancelled and reported “found”.
But back to that $35,000. It was real. I didn’t find it in a ditch, but my wife (who rarely knows the status of her own investments) “found” it after one of her U.S. bank CDs reached the end of its term.
This morning I invested that $35,000.
My weakness is investing money in individual stocks. I’m a bit like a friend of mine who has won vast amounts of money in casinos. He keeps playing, and he knows that eventually, the casinos will have the last laugh. That said, gambling is fun for him, and buying individual stocks is fun for me.
If you’re a regular reader of this blog, you’ll know that I’m pretty conservative. I rebalance my portfolio allocation when things get out of whack, but I don’t trade stocks. Trading, in my view, is a slippery slope. I buy when things are cheap, and I rarely (if ever) sell my holdings. Read more in this Globe And Mail article by Larry MacDonald: Teacher Waits for Investment Opportunities.
I’ve beaten the market handily over the past decade, but I’m no dummy.
I’m not going to keep beating the market.
Eventually, the casino will bite me in the rear, and I’ll be forced to index everything. Only the best investors fully index. The rest of us are driven by vanity and a silly illusion.
The vast majority of my money is indexed, which proves that I have at least some potential as an investor. My wife’s account (which I manage) is in Vanguard’s total U.S. stock market index, Vanguard’s total U.S. bond market index and Vanguard’s international stock market index. I’m no genius, but I’m no fool either.
My Singaporean based account holds a Canadian short term government bond index and Vanguard’s first world international index among a variety of common stocks that (as a group) have knocked the lights out over the past decade with some lucky bottom feeding purchase strategies. (a euphemism for lucky timing)
So what did I do with that $35,000?
I wanted to prove to myself that I was evolved, and I added to my international stock market index.
Since 1999, my individual stock market picks (the stocks I’ve bought) are ahead of the S&P 500 index by 120%.
So what do you think? Am I crazy to buy indexes at all, with such a track record?
I don’t think I am. But what do you think?