Saturday, January 01, 2011

Reflecting back on My 2010

This what I was thinking as 2010 began.

Heading into 2010, I believe there are a few things to keep an eye on. We’re still early in the economic recovery, so I expect an upside bias to the stock market. But history shows that mid-term election years tend to see a market correction followed by a big rally. Wage growth will still be tough. I think state and local governments will be surprised on the upside by 2009 tax returns come the April filing, and that will relieve some of their deficit issues. But states are still dealing with high unemployment. I expect unemployment to creep down as companies begin to hire folks in anticipation of steadier growth ahead.

I think the economic recover will be slow but steady. So I’m looking for a return in the SP500 of about 10%. Not going out far on the limb.

As for my portfolio, I remain 100% long but will watch closely for the mid-term correction to lighten up in anticipation of more attractive prices and a rally into year-end.

That's exactly what I did. I sold a bunch of beta (NDX and small caps) near the end of April, 2010. Sat on the sidelines with that. To be honest, I did have some in VTI and SPY through the correction.

I then went back into the NDX and small caps on August 30th for the Labor Day pattern, and ended up holding on to this day.

That enabled me to avoid the summer mid-term election year correction with the most volatile part of the portfolio, while hopping back in as the market was retesting the correction lows in late August.

Okay. How'd I do? Other than being way off on the states budget situation.

Here are the benchmarks:
DOW up 11% and 13.99% with dividends. Closed at 11577.51.

SP500 up 12.8% and 15.1% with dividends. Closed at 1259.64.

Nasdaq up 16.9% and 18% with dividends. Closed at 2652.87.

My Investment Rate of Return for 2010 was 20.63%.

But that is soooooo last year. On to 2011...

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