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Macro Economics
An Awesome Investor?

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By yttire
February 22, 2010

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I have been looking over my investment results for the past seven years. There is a nice upward trending line over the history of my net worth calculation for the past seven years. OK a dip or two. But overall, upward. I assure myself it is because I am such an awesome investor. I tell myself this every time I look at it. Perhaps not out loud, like "I am so awesome", but more like quietly, subconsciously "what I am doing is working, keep it up dude, make sure the wife sees how good we are."

But if you look a little closer at the numbers behind the curtain, there is a bit of a different story.

In fact, I am a crappy investor. Most of the individual accounts really are not up much at all over the past seven years, unless money is funneling into them. We are good savers. We save ungodly amounts of our income, and this pushes up our net worth in a steady trickle. But each individual account, well, the ones that don't have any new money added to them- they suck.

However, they suck less than the overall DJIA. I added that line in at the bottom of the spreadsheet, because it is confidence inspiring. But still, heading down, or downward, even it if it is less than the overall market, sucks really.

In my defense, to some degree, I actually am an awesome investor (yeah, we are stuck in black and white extremes during self analysis, but that is the way it is). The stock market seemed horribly overvalued in my mind, and all this discounted cash flow mumbo jumbo seemed like an excuse to pay more for the company than what it was worth. Real dividends are interesting to me, especially dividends which are above the 10 year T bill yield. Everything else is just a dream that it will become that.

So the result of this awesome investing brilliance is that we dumped money into our house like there was no tomorrow - it functions as a bond, which has the added payback that when it is paid off, your demanded cash flow is also reduced. (Also your income tax write-off, but that is another tale). And the outcome of dumping money into the mortgage is that our overall net worth steadily climbed, even while stock investments soured, or struggled. In retrospect it actually was brilliant, but it was brilliance born of fear (of my job vanishing). If I had to do it over again, I would.

But that brings us back to the crux of the problem- the point of having investments, of risking capital, is that they go up over time. I am confident the stock investments will, over the next thirty years. But actually, I desire them to head upward generally over the next ten. That is a lot to ask. It is a lot to ask because the last 10 years haven't really yielded much, and right now our economy is in the ---- hole. There is an insane amount of deleveraging that really should still take place, and I suspect this will play itself out in part in the stock markets. So I am pretty well agreed we are in a secular bear, but that makes one wonder- what are you supposed to invest in? The market may ignore the news, and just head up randomly. Or not.

I am curious what mutual funds, what stocks, other people are buying and why. I like Vanguard's Wellington fund. It is 80 years old, and tends to head upward over time with a bit less risk. However, that is not a complete portfolio. It is part of mine, I am looking for ideas for more.

I also like KMP, and other similar Master Limited Partnerships that pay a hefty yield.

I am seriously thinking about buying a rental property, in the real world, outside of REIT's, which appear to be a terrible proxy to the real thing, because they control the amount of leverage, which is higher than it should be.

To be fair to myself, we have an investment adviser, who handles a small amount of our money. He is a worse investor than myself. That account consistently under performs the other accounts. However, it isn't his money, so one might expect this. I allow that money to sit under his control partly because I hope he pulls something out of the air, and if he doesn't, I feel superior. It is a diversification of thought process (perhaps a thought process of zero on his part, but it is at least different).

So I am curious what you are investing in, especially for core holdings.