Year End Account Summary – 2008

What a difference a year makes!  At the end of 2007, I was ready to plan my retirement in my 40s (I was 36 then) after finishing the year with a more than 26% gain (better than quadruple most of the major indexes’ returns).  At the end this year I’m starting to plan how I can even get back to dreaming about it after losing more than the previous few years’ gains (worse than all the major indexes by a good bit).  For now I can only focus on revamping my planning.  I learned a lot in 2008.  I sold more naked calls successfully this year, I finally started to hedge some long positions (although much too late) and I bought some calls that turned a nice profit for me.  I still need to learn to trust the charts that I draw more than I have rather than try to force trades.  I’m getting better about that.  I used to do it better, but got overly confident this year and also got anxious.  I have to hedge better, especially when a bull market is running on for a greater than usual time.

I ended 2008 with a balance of $52,999.48 according to TD Ameritrade and $53,278.28 according to Quicken (something hasn’t settled yet in Quicken).  At least I broke my three month losing streak and finished up in December from my November finish. I stopped making deposits after my early July 2008 deposit to our account.  In part because I saw that I was just losing the money and not growing it and also because we used more for household and medical expenses.  The fact that I changed jobs in January and make a lot less now played a large factor too, even with my wife getting a raise.  My cut was greater than her gain.  I’ll either change jobs again in 2009 and go back to a salaried roll or I will start making better commissions as the market changes, especially if I focus on my job more than my investments.

Here’s how I compare the major market indexes for all of 2008:

• 2008 Full Year Return: -52.61%
• Annualized Since 4/8/07 (blog’s beginning): -35.85%
• Deposits for month of December: None
• Capital gains losses in 2008 from trading account: -$20,435.24

According to Morningstar, here’s how the major indexes have done over the past year ending 12/31/2008:

• 1 year S&P 500 Return: -37.00%
• 1 year Dow Jones Return: -31.93%
• 1 year NASDAQ Return: -40.54%
• 1 year Russell 2000: -33.79%
• 1 year S&P Midcap 400:  -36.23%

The VIX ended the year at 40.00 and the VXN ended at 40.79.  We’re lower than the highs from a couple of months ago, but still at historically high levels.  I think selling options is still a solid play and can only hope to make better picks while pursuing this angle in 2009 with more caution and less forced trades.  Above I mentioned that I learned a lot in 2008.  Now, speaking of the VIX I know that when I saw the VIX under 15 I shouldn’t have been selling naked puts, but should have been buying calls if I was bullish on a stock.  The risk/reward wasn’t worth it at those levels, especially so late in a bull market.  I was blinded by greed, but better to have learned the lesson in 2008 when I’m still employed. I’m looking forward to 2009.  Even if the major markets don’t end the year with a gain, I plan to.