I pulled out another month with a gain. As I’ve mentioned in my regular posts I’ve been underinvested, I’m working on changing that, but the longer the rally goes the more certain I am of a coming step back. (I’m going with the lesser known saying here – seven steps forward one step back.) I ended September with a balance of $81,165.71 according to TD Ameritrade and $81,189.76 according to Quicken. That’s a gain of $722.43 over my August finish.
I’m a month into my contract at my new job and am getting settled in better now. That should allow for some more time to research, trade and blog. I’m going to try to take the Series 65 this month. I’ve paid for the exam already, so I have to take the test within 120 days or I forfeit the payment. I’m starting to score 80% on most of the practice exams now and only need 68.5% to pass. I’d like to be closer to 90% on a regular basis to allow for test day jitters or misreading of questions, etc. Now that I’m getting more confident I have to find the time to go take the test one weekend.
A side effect of my heightened risk aversion is that I’ve lost my lead on most of the major indices for the current year. I was already trailing for the past 12 months, but I closed the gap there some by letting September 2008 slide outside of the time frame. One good sized dip in the market while I’m under invested will put me back into the lead and then it’ll be a race to December 31st. I’m still ahead of the Dow Jones year to date return and within a day or two difference of catching the S&P 500 again for the current year. The rest have slipped away from me by a decent margin, but by doing these comparisons I’m learning where my weak spots are for future reference.
I only sold around $1,375 in new option premiums in September. Since I bought a couple of them back, one for a profit and the other a loss, I didn’t even give myself the opportunity to make much for the month. That would have been fine if the markets sank, but they didn’t so I missed out. A better move would have been to sell more options farther out of the money to only put me in a position to have them assigned if the underlying shares sank at least 5%.
As part of my maturing as an investor (maybe it’s all the Series 65 studying) I took my first real step in diversifying my portfolio. A week ago I moved about 8% of my account into an intermediate term bond ETF, BND. This is a long term position for me and I’ll probably add to it or another bond ETF before long. It stands to hurt my overall return in times of bull markets, but should protect my gains in bear markets. With my risk aversion moving from “balls to the wall” to more of mix of that plus wealth preservation this was the logical step. Once again I didn’t send any deposits to TD Ameritrade for the month. My first few pay checks have hit, so I should get back in the habit again soon, but since I’m underinvested as it is I’m sitting on it in our checking account while we consider buying a car in the new year and debate how much of a down payment we should put on it.
Here’s how I compare to the major indices.
My 1 year return: -17.36%
Year to date (YTD): +18.49%
Annualized return since 4/8/07 (my blog’s beginning): -14.45%
Deposits for month: None for September
According to Morningstar, here’s how the major indexes have done over the past year and the current year to date (YTD):
Dow Jones Return: -7.38% 1 year, +13.49% YTD
NASDAQ Composite Return: +1.46% 1 year, +34.58% YTD
Russell 2000: -9.55% 1 year, +22.43% YTD
S&P 500 Return: -6.91% 1 year, +19.26% YTD
S&P Midcap 400: -3.11% 1 year, +30.14% YTD
The VIX ended the month at 25.61 and the VXN ended at 26.50. They were both lower during September, but have started to inch back up as the likelihood of a move lower increases. I’d like to see a little more fear in the markets to help with the volatility part of the options pricing model. Without higher volatility the benefit of selling options decreases dramatically.