As you know, at least if you follow me or have in the past, I have been MIA since about May of 2018. Why you ask? Well some big things happened at 2k Hedge Fund. First off I got married! Yes that’s right, there is now a Mrs. 2k Hedge Fund and the planning of a destination wedding took over much of my life’s free time. Add this to a couple of changes inter-job that led to much more hours (and responsibility), as well as the purchase and renovation of a house, and the time that I had to work on the blog went from small to nil. I still managed to keep up with the portfolio updates on the site and the historical returns but that was about it. Sometimes things have to take a hiatus to preserve the quality of work and that is what happened.
But now it is 2019 and I have a much better grasp on how to get things done…and get things done well.
First off though, let’s review what happened in 2018:
The portfolio ended up slightly negative for the year (uh oh) although it did still beat the S&P 500 in terms of total return. There were a few things that would have led me to crush the S&P, all of which I rightfully knew and should have implemented, but unfortunately I simply didn’t get it done. My goals for 2018 were not met in terms of investment, mainly for two reasons: One, the wedding and house ended up costing more than I was anticipating, and two I was hesitant to place more money into the market at the valuation that was being given to it. This is something I should have listened to a bit more.
Where I Went Wrong
The best thing that you can do when you perform any task is to review the results and search for any spots that you could have done things either better or more efficiently. Like they say “Time is money” so the more automated you can make your trading, not to mention the less emotional, the better in my opinion. While this portfolio is not designed as a swing trading active portfolio there are some things that I should have done to lock in some profits when I was in the positive.
Trying to be to Passive.
The reason that you create an account like this is for dividend income, future gains in great companies, and finding bargains through looking at fundamentals not simply charts. All that being said, common sense has to come into play when you are riding high on the profits. Many of my positions we up well over 25% and some even more than 50%. At these prices I believed that they were overvalued in comparison to my valuation estimates. Obviously this screams SELL but I had not established an exit strategy and, as an analytical person, I figured that waiting it out instead of exiting the positions was a better option. This was not the correct way to do things and I realize that now. I now have an exit strategy set and will go through in my next post.
Worrying more about yield than Valuation.
While the yield of a company is very important, it seemed like at times that I got wrapped up more in the yield that was being produced than whether a company was significantly undervalued. This of course is always a mistake while a 6% yield looks great on paper, the stagnant value of the position means that the yield is the only return you receive. Sometimes this is fine, especially if the company is a dividend grower, but for the most part this will not maximize the results of your portfolio and could be detrimental to it.
Having too many positions.
I am currently sitting at 18 positions and to be honest that is not far away from the max amount that I am willing to hold. Everyone is going to be a bit different on this one, just depends on the amount of time that you have to research. If you can’t read through the quarterly reports of every company you own within a week of the reporting, I suggest that you reduce your holdings. *Note: This may be very different for those looking to create a true passive account under other strategies than I present here.
There is definitely more than three things that I can learn from 2018 but I do not want to have a list here that drags on. What I hope you take from this post more than anything is that a simple review of your strategies and actually putting your mistakes in writing can be invaluable to how you invest in 2019.
Thanks for reading.