Recent Performance of DJI

[haha]

It may be that the interests of the board have moved away from index performance and stocks recently, but just in case that is not true I thought I would start a thread on "market performance". It appears to me that there has not been any meaningful rally off last fall’s Dow bottom around 7500. Neither a bear market bounce nor a new bull market.

A 3 month DJI chart shows just a trading range. Right now it is only marginally above last November's bottom around 7500. (about 7%)

I am somewhat surprised at this because of the huge spike in VIX that coincided with the bottom. I would have expected a strong bounceback rally.

There are big divergences though- my own 95+% equity portfolio is up 25% in the same period, notwithstanding the drag of monthly withdrawals. And my portfolio was also down less than the Dow from the top. This is in spite of having some real stinkers and misjudgments. On the positive side I dodged a few bullets too- by immediately reversing purchases that in the end might have really damaged performance. I guess the big mistake that I made was owning any stocks at all until quite recently.

Since risk is often defined as divergence from indexes or from full diversification, I guess my portfolio is by definition more risky. I do kind of wonder about that definition though.

Ha

[Animorph]

You are sure to diverge from DJI since that is not a diverse index itself! I sort of use a 50/50 mix of S&P500 and EFA (etf) as a benchmark.

The DJI is about the worst in off-the-bottom performance of the indexes/ETF's I watch (small foreign value DLS etf is slightly worse). All the blue-chip dividend-paying stocks that aren't going to move as much as most of the other styles. It's also down less than everything I watch except healthcare (VHT etf), which is good too.

I've been trying to bias my AA a little in favor of those styles that have dropped more and are closer to their bottom, buying cheaper shares of ETF's when they drop in price and selling my higher priced shares at a small gain when I have extras. DJI would be good for riding the market down, but not back up.

[haha]

Quote:

Originally Posted by Animorph DJI would be good for riding the market down, but not back up.

[Maurice]

The other issue is that the DJI is weighted by stock price rather than market value. With so many components now trading at low dollar amounts, their movements are under-reported in the DJIA. Its my understanding that traditionally, the portfolio managers index committee at DJ remove stocks that trade below $10 but they've seem to be giving some current components a break.

I read recently that if the financials were to go to zero the Dow would only drop another 300 points (or something like that).

[donheff]

Haven't capitulated yet - soon?

[Stevewc]

Quote:

Originally Posted by haha It may be that the interests of the board have moved away from index performance and stocks recently.there has not been any meaningful rally off last fall’s Dow bottom around 7500. Neither a bear market bounce nor a new bull market. A 3 month DJI chart shows just a trading range. Right now it is only marginally above last November's bottom around 7500. (about 7%) There are big divergences though- my own 95+% equity portfolio is up 25% in the same period, notwithstanding the drag of monthly withdrawals. Ha

Hello Ha,
I couldn't help but notice your 95% stock indication. If you don't mind tell a rather new investor (still learning) how to or how you allocate and live from investments? Just to give you insight, I hope to retire at the end of this year (2009). I've been buying vanguard total stock fund and FTSE foreign stock in small chunks as the market has fallen since mid June 2008. The first few buys look terrible right now but the last several look pretty good. Trying to catch that falling knife has been tough. I'm still thinking about and working on the bond side of my portfolio. Most of my retirement money (80%) is taxable. Any thoughts or insight will be appreciated. Do you have a pension or other funds, or strictly live from investments?
Looking forward to hearing about your experience/insight knowledge gained,
Steve

[MichaelB]

Quote:

Originally Posted by haha It may be that the interests of the board have moved away from index performance and stocks recently, but just in case that is not true I thought I would start a thread on "market performance". It appears to me that there has not been any meaningful rally off last fall’s Dow bottom around 7500. Neither a bear market bounce nor a new bull market.

Perhaps the value dispersion within the equity space has become dislocated. Those that stay the course will be well rewarded over the long term.

[ERD50]

Quote:

Originally Posted by Animorph You are sure to diverge from DJI since that is not a diverse index itself! ..... DJI would be good for riding the market down, but not back up.

While I agree that the DOW is a dinosaur of an index, and I tend to disregard it, I'm not sure that our feelings play out in real life:

TWO YEAR CHART. divs not included.



-ERD50

[haha]

Quote:

Originally Posted by Stevewc Hello Ha, I couldn't help but notice your 95% stock indication. If you don't mind tell a rather new investor (still learning) how to or how you allocate and live from investments? Just to give you insight, I hope to retire at the end of this year (2009). I've been buying vanguard total stock fund and FTSE foreign stock in small chunks as the market has fallen since mid June 2008. The first few buys look terrible right now but the last several look pretty good. Trying to catch that falling knife has been tough. I'm still thinking about and working on the bond side of my portfolio. Most of my retirement money (80%) is taxable. Any thoughts or insight will be appreciated. Do you have a pension or other funds, or strictly live from investments? Looking forward to hearing about your experience/insight knowledge gained, Steve

Hi Steve. I got my first SS check this month. It is small, and further reduced by Medicare. But I think it will help nonetheless. No Pension. I have nonetheless been retired many years basically following what I think of as an opportunistic total return and income strategy, mostly through equities with reasonable and growing dividends. To me, any strategy that depends on regularly liquidating holdings in the markets and hoping for good prices when you do that is just a form of the greater fool theory.

A portfolio that cannot over time pay you a reasonable and growing income IMO is suspect. Is it not better if you can expect your income to come from cash payouts by the companies themselves, rather than expect to buy your groceries with intermittent stock sales?

Below is a video that makes some important points about this strategy. It is certainly not foolproof; I have seen my accounts dwindle over the past year, and also some of my stocks have made dividend cuts. But so far at least more raises than cuts.

I think this strategy only appeals to a minority, and it may not be the best approach. The debacle in financial stocks over the past quarters demonstrates some of the problems with a dividend strategy, since financial stocks even before they got stomped tended to be steady payers of of high and rising dividends. Then kabam- they were cutting and cutting and losing market value all the while. The dividends appeared attractive, but they were not a safe buy as the dividends looked shaky (which has proven to be right; they were and perhaps still are shaky!)

Yahoo!

Ha

[unclemick]

Very good.

heh heh heh - Want a little Norwegian with your Yahoo?

[kyounge1956]

Quote:

Originally Posted by haha (snip) A portfolio that cannot over time pay you a reasonable and growing income IMO is suspect. Is it not better if you can expect your income to come from cash payouts by the companies themselves, rather than expect to buy your groceries with intermittent stock sales? (snip) I think this strategy only appeals to a minority, and it may not be the best approach. The debacle in financial stocks over the past quarters demonstrates some of the problems with a dividend strategy, since financial stocks even before they got stomped tended to be steady payers of of high and rising dividends. Then kabam- they were cutting and cutting and losing market value all the while. The dividends appeared attractive, but they were not a safe buy as the dividends looked shaky (which has proven to be right; they were and perhaps still are shaky!) Yahoo! Ha

haha, do you also own REITs, either individually or in a REIT fund? Would they fit into your strategy?

[haha]

Quote:

Originally Posted by kyounge1956 haha, do you also own REITs, either individually or in a REIT fund? Would they fit into your strategy?

REITs would fit fine, and I owned a number including KIMCO, Vornado, and Equity Office from about 2000 to about 2004.

Later they got very expensive, and now they have been slaughtered. I have not looked to see if there is much value there, or if this is another banking situation with many destined to hit $1 or so. At the very least careful and skillfull analysis would be warranted.

I think many of the dividends are not safe, and it is demoralizing to get hit with dividend cuts or eliminations. Specualtions are fine while you are working, but they get tricky if you need to live from your portfolio. That said, speculating is a habit that dies a slow death with me.

Ha

[Stevewc]

Ha,
Thanks for the link and the information.
Have you ever considered buying into a dividend mutual fund? Giving one plenty of diversification and letting the so called professionals choose the stocks? Just wondering what your opinion of this strategy would be?
Steve

[haha]

Quote:

Originally Posted by Stevewc Ha, Thanks for the link and the information. Have you ever considered buying into a dividend mutual fund? Giving one plenty of diversification and letting the so called professionals choose the stocks? Just wondering what your opinion of this strategy would be? Steve

Steve, I know almost nothing about these because I have always preferred direct ownership.

They may be fine. Look to see how they have performed in the last 18 months. That as certainly a stress test. I imagine many of them were loaded up with financials that later got into trouble. To me it is easier to pick a stock than to pick the right muitual fund to pick the stock.

Also in investing for income, even a fairly low expense level cuts into what you have left to spend.

You touched on another consideration when you referred to the "so-called professionals".

Ha