Does “playing the market” payoff?

Does “playing the market” payoff?

A short note on “playing the market”. Recently I was very discouraged to see all the red in my portfolio. I was looking at an account that I had first opened specifically for “playing” in the market. I was going to use this account to really cut my teeth on the more advanced market strategies, like trading options.

Over the course of the last 6-years that account became more and more my primary stock account. In 2009 alone I doubled the amount of money in the account… and yet here I have all this red, even having put money in during the down years…

Upon closer inspection I found that over the 6yr life of this account I was actually up; less than 1%, but up none the less. When I looked at the S&P, Nasdaq, and DOW over the same period I had beat all but the Nasdaq. Quite handily too, the S&P was down over 5% and the DOW was down nearly 4%. Suddenly my 1% looked a lot better.

I started to evaluate some of my “red” holdings… Many were stocks that I happened to originally buy near the high point in 2008. There has been no reason to sell them off and take my losses, as I think they are still good companies. In fact many of them I hold multiple “lots”, and have good gains on a portion of the holdings. Others are not quite so good.

I still hold PGH which is a Can-Royal. There was a window back in 2005/2006 when these things were solid gold. High dividend, which had to be paid by law, safe industries, stable stock price. Since then lots has changes, and probably should have gotten out early in those changes (particularly after some legal changes).

Also doing miserable, DRYS. The shipping industry has been devastated since the ‘collapse’ of the global economy. Should I continue to hold this stock, it’s a question I wrestle with. I also hold DSX which has been equally devastated. There is probably no reason to hold two shipping companies given the current state of global trade.

Under the surface though there are stocks like CEDC, which has been highly volatile, but the company itself has continued to grow tremendously. I’d venture to guess if you adjusted (favorably) for the fall in the Euro the stock would be a good 30% higher… but that’s not how things work. Given that they are dealing mostly in Europe, and then having to convert to US dollars, they are being hurt right now. I have about a 5% loss on my total holdings of CEDC, but I have one lot that is up over 100% and a larger lot that is down 20%.

Banks make up another portion of my ‘red’ stocks. They are all down 5%-20%, however several of those are preferred stock I’ve picked up in the last 6months. Once you start factoring in distributions (or dividends on some) then the loss is much smaller. I think in the long run I will make out quite well as those shares move back towards their issue price and continue to pay +8% dividends on their way there.


In short then; Yes, I would say it is worth “playing the market”. I also feel I have learned a lot about when to cut my losses, and while I would not have done that during the huge down turn, I did manage to go into that downturn with some stocks that had already started their falls.