My increased market exposure from October paid off for me in November as every position improved from month’s beginning to its end. In my October Summary I pointed out that I got into the markets too early even though I expected a decline. In November I stayed patient and those paper losses turned into nice sized realized gains. With an account spread from TD Ameritrade (AMTD) to my checking account and finally to Interactive Brokers (IBKR) I ended November with a total account size (in transition) of $84,103.30 ($11,115.20 + $33,000 + $39,988.10). That’s a gain of $4,942.27 for the month. Before getting carried away and patting myself on my back I have to recognize that I had a loss in October, so I prefer to look at the two months together as an average gain of $1,622.26 each month. The $33,000 is in my checking account just due to bad timing. I did an ACH transfer and am now transferring it out of my checking account to my new brokerage account. I briefly thought about just doing a position transfer, but thought this would be easier since I already had the ACH transfer process set up with both accounts. In hindsight, it might not have taken the easiest route, but I’m pretty much done now.
I’m debating leaving that $11,115.20 with AMTD and keep it invested in a bond ETF while I work IBKR for my option trades. As I add funds I might even add more to the AMTD account for a better asset allocation. I’m just toying with the idea now, mainly because every few months my wife (married 13 years as of yesterday) asks if we should put more into savings versus investments and I always say I’d rather not (shocker huh?). We have another account with about five months worth of expenses in CDs and a money market and I’m comfortable with that. Having the separate bond account would be a compromise I think we could both deal with. I’m going to be partially invested in bonds anyway and this would show her a more exact separation of funds rather than my typical explanation of asset allocation within the same account I’ve been working towards recently. But now I’m way off track for the intent of this post.
After having such good gains in November I used the account transfer as an excuse to not be heavily invested for now. I’m unsure where I think the markets are heading and I have a sizable gain for the year as it stands. Then again, a little more would be nice, so I’ll probably be back at it again soon, at least with a little more exposure. I get the feeling the market is getting a little edgy right now and I don’t want to lose the gains I’ve already locked in for the year. For the past year comparisons, I’m finally past my worst stretch of months since I first started to learn how to invest. With the end of my down months of 2008 off my trailing year history I’m left with my best month ever still on my past year’s return calculation. I’m up huge for the past 12 months, but won’t bother beating my chest (much) since it’s only going to last for this month’s post. My past 11 months are nothing to be ashamed of though – I’m back above the DJIA, S&P 500 and the Russell 2000 indexes’ returns. With such a small lead on the indexes, I’m going to have to be on my toes to finish the year with the advantage still.
Speaking of which, here’s exactly how I compare to the major indexes.
My 1 year return: +38.36%
Year to date (YTD): +24.74%
Annualized return since 4/8/07 (my blog’s beginning): -13.47%
Deposits for month: None for November, but transferred my account from TD Ameritrade to Interactive Brokers which could skew returns in Quicken since cash was in my checking account for a few days while between accounts. Any skew will be minor, but also accurate since I didn’t have the money invested at the time.
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: +21.05% 1 year, +21.52% YTD
NASDAQ Composite Return: +39.66% 1 year, +35.99% YTD
Russell 2000: +24.53% 1 year, +17.70% YTD
S&P 500 Return: +25.39% 1 year, +24.07% YTD
S&P Midcap 400: +35.53% 1 year, +29.27% YTD
The VIX ended the month at 24.51 and the VXN ended at 24.73. With volatility still lower (although up from its recent lows) than it was for the first half of the year, premiums are much lower which makes the bigger gains harder to come by. As option sellers we’re not being paid as much for the risk as we were earlier and one would hope that means the risk itself has declined, but I have to wonder if that’s true. I’d rather see the VIX and VXN higher to sell more puts. On the other hand, I don’t think it’s low enough to buy options, especially since I don’t have a clear read on which direction we’re heading in the near term.