Learning From The Past, Part 2

<< Read Learning From The Past, Part 1

Photo Credit: PSParrot

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.

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Disclaimer: David Merkel is an investment professional, and like every investment professional, he makes mistakes. David encourages you to do your own independent ...

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