It was Rodney Dangerfield that made a living telling people that he did not get any respect. Well neither do I. I have a friend that relies on me for investment advice. Their broker years ago laid some big eggs and made their investment net worth fall to half its value. I took over in January 1, 2009, moving their account from a full brokerage firm into an online discount brokerage firm.
I started in January 2009 with $49,726.03. As of January 1, 2012 their Net Worth will start out at $102,454.27. That is an increase of 106.04% over three years. If you go by the Dow, it only increased in the same time period by 39.21%. The Dow was the best gaining index in the world outside of the Utility index for 2011. My friends gains beat both of them for the year. The Dow is up 5.6% and the Dow Utility Index 15%. My friend made 15.35% for the year. Tell me, would you be happy with that?
My friend’s problem besides being greedy, they had three companies in their portfolio that filed for chapter 11 bankruptcy. If that did not happen, they would have made more money.
If you look at the data above, you will see that from 2009 until now, the money accumulated was done at a steady pace. But if you would have been looking at these investments day to day, you would have seen a different picture. My friend’s net worth would have been going up and down all the time. They saw one bad surprise after another in the economy and in the bond market. Business in 2011 went to “hell in a hand basket” as well and we were looking at an economic collapse in Europe. Even with all that, my friend made $12,649.07 or 15.35% in 12 months.
The objective of this story: when investing in the bond market, remember that you are investing for the long term. You are not investing for the short term. If you have this idea that you are going to make a killing in the market over the next few weeks, you should not be in the market at all.
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