So 2016 came in swinging! Late 2015 had all the set ups with volatility, the late august downswings and then continued volatility thru last quarter. But 2016 just surprised everyone with no analysts out there predicting anything remotely close. Led by oil, global fears about various things etc. the first three weeks of Jan 2016 saw about 1500+ points downsizing of the DOW. Similar losses across the board in various sectors and indices followed. Now this blog had mentioned about some quality stocks, all American ones, like Fedex or MCD or WMT etc as core holding in the stock portfolio. These very stocks got burned just like the rest. XOM or AAPL or utility stocks-all of them had suffered. No fundamental, no CEO reassuring similar to what happened in 2008, no sector really performing well above expectations.
A study done internally for the last 5 years showed that ETFs and low cost funds were better performers compared to individual basket of stocks - big or small .. we focussed on the big and blue ones but they fell short. A mix was a debatable option and overall some stocks are okay to hold in your portfolio but by and large, there is no point in holding too much of them or trading frequently. The study was done to also determine the usefulness of Bank of America Meril Lynch Edge brokerage program which gives $0 commission fee if you have more than 25,000 USD in assets with them. Basically, the idea was to stash 25k as solid winnings or core from so long and keep them on the side. But it fell short too and there are other CDs out there which give better interest rates, negates the need to have 30 free stocks per month. At max, I think one needs to cap free trades to about 10-20 or so per year. Anything more than that and likely you are wading into hedge fund territory from individual investor territory. Again these are numbers and different people have different strategies and limits and numbers so nothing wrong if you trade more than that and turn in a good return. But keeping in the basic philosophy of the blog about Vanguard/Bogle/Buffet and others from similar background, we would limit trading in stocks or etfs or mutual funds. Holding in Buy and hold has a reason and it is better to hold off for a longer terms and then sell in higher ranges and buy in lower ranges with new money flowing into cash positions. I think fundamentally the buy low sell high algorithm is the only sound strategy. Rest everything are just additional tools in the toolkits and salts on your algorithms which also test your resolve and patience.
Oil is at multi year low and it could go lower than this or bounce back but certainly this qualifies as lower ranges and hence it is better to buy oil commodities or services. VDE from vanguard or XOM/COP etc are all good buys. XOM is still a tinge higher at 70s and could go lower to 60s at which point it would be a decent bargain.
