Experiment Modified

January 18, 2014

Well, I’m only two weeks into my snake handling market approach ( trade specific equities ) and,  I can already tell you I’m not thrilled with the results.

Of the 23 round trip trades I’ve made since year end, 14 were losers and only 9 were winners.  True, net, I’ve realized  $ 2,577 in two weeks using about 10% of my capital, but I don’t think that is an appropriate reward for handling poisonous snakes.  Some of the names I’ve traded can really bite and require all day long attention.  These names include,TWTR, WETF, AOL, DDD, BIDU SWHC, and PLUG.  I’m still holding FB, CAMP and WBMD.   I will continue my experiment on a more selective and scaled back basis and keep you advised of my results.

Less plain vanilla than Index ETFs,   such as SPY, and way less dangerous than equities ( for the average investor ) is a whole other slice of the ETF universe commonly referred to as Sector ETFs.  Just as Index ETFs eliminate specific risk, but not market risk, Sector ETFs eliminate specific risk,  but not market, sector or event risk.  These are commodity ETFs ( including precious metals ), country and region  ETFs, and assorted slices of the USA economy such as the Health Care Sector, Financial Sector,  the Information Technology Sector etc.

As I expected, since Jan 1 the Sectors ( in general ) have been outperforming the plain vanilla Index ETFs.  It was expected that 2014 may be more of a stock picker’s market and so far its signaling that there will be better returns from Sectors than the market as a whole.  Of course this means you need to chose winners from  among the Sectors, but, at least your decision usually  can be based on publicly available information.

Some of the comparisons ( year to date ) between Index ETFs and Sectors ETFs are as follows:

Sectors:  XBI ( Biotech ) + 20.7%, IHI  ( Medical Equipment and Devises ) + 4%, GLD (  Gold Bullion ) + 3.3% , XLF ( Financial Including Banks, Insurance Companies and Brokers ) +0.6%. I have positions in XBI, XLV, XLF,

Versus

Index ETFs:  RPG ( Russell S&P 500 – Growth ) + 1.5% , QQEW ( Nasdaq 100 Equal Weight ) + 1.2%, VTI ( Entire USA  Stock Market +0.2% and SPY ….-0.1%. I have positions in VTI, QQQ, RPG, SPY, VB and QQEW.

VTI Update:  As of today,the December 31, 2011, VTI  trade is now 514 days old and is ahead 55.07%.  When the price of  VTI ends a month lower than its 200 day simple moving average, it will be the signal to leave the water, leave the  jungle and look skyward for any sign that the ETF fixed income coconuts will begin to fall from the trees that line our  beach.

Richard Maurice Gore

 

 

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