Year End Account Summary – 2010

2010 was a big let down for me on the investing front.  The markets pulled out solid double digit gains and I fizzled with my timid start and fearful follow through that lasted into the fall.  I started the year under invested and once I started getting more bullish by mid-year I kept my indirect hedge in place with VXX and its losses cost me more than the gains I was making.  It was a poorly planned model and I paid for it, but I also learned a great deal again which will benefit me for the rest of my investing career.

In my first full year as a Registered Investment Advisor I also learned to juggle others’ accounts while managing my own.  Through advising my clients I did some self reflecting and realized I needed to move a little more of my account into a better asset allocation with bonds having an increasingly prominent place in my holdings.  I’ll increase this percentage in 2011 as I push more contributions to the bond account and fewer contributions to my equity portion until I get up to 20% in bonds and down to 80% in equities.  My plan is to grow the equity portion enough that it forces more than 20% of my deposits towards the bond account after my first goal is met.  Since I’m starting with only about 10% in bonds I’m not sure if I’ll reach this 20% goal in 2011 or if it’ll push into the next year.  Part of that will depend on how fast my equity portion grows and also on how much my wife talks me into spending when we update our kitchen.  Right now it looks like it’ll be a good bit less than our new car was, so I probably shouldn’t complain too much.

In 2010 our big expense was paying off our new car in under a year.  I probably should’ve taken longer to pay it off, but with my main job being so tenuous I didn’t want to risk having the debt and payments in place while we had a reduced income.  Since my contract was renewed it’s easy to look back and second guess my moves, but having piece of mind is important.  I’m up for one more contract renewal with AT&T in the second half of the year and then I’ll have to find enough clients to make my business my only job (not counting this blog which doesn’t pay much).

After chasing the round $100,000 mark for years I finally got there in 2010, mainly due to deposits.  I finished 2010 with a combined account balance of $123,258.53 ($110,109.02 with Interactive Brokers and $13,149.51 with TD Ameritrade).   Quicken said $110,108.53 and $13,149.51, so they are back to being close again.  I’m going to try to make steady deposits throughout the year (again depending on our kitchen’s cost) and am setting my goal at $180,000 by the end of December 2011.  I’ll get another post up this month that details my plans better.  Since I’ve already updated my trading model to avoid the same mistake with VXX again I am going to stop looking back and thinking about what could’ve been and keep my focus on what can be.

Here’s exactly how my returns compare to the major indexes.

My 2010 return: +2.55%
Annualized return since 4/8/07 (my blog’s beginning): -7.06%
Deposits for the month: $2,500 on 12/13/10
Deposits for the year: $35,500 (Every month except April when the tax man got it and June when we went on vacation to Scotland)

According to Morningstar, here’s how the major indexes did last year through 12/31/10.

Dow Jones Return: +14.06%
S&P 500 Return: +15.06%
NASDAQ Composite Return: +16.91%
Russell 2000: +26.85%
S&P Midcap 400: +26.64%

The VIX ended the month at 17.75 and the VXN ended at 19.48.  That’s down from their peaks in 2010, but still not to their historic lows.  If 2011 goes as I expect, volatility will drop more throughout the year with a few short lived blips higher.  That’s one of the many reasons I’m selling longer dated options, I think they’ll get cheaper due to lower volatility, not just time decay.  If I’m wrong I’ll be prepared to take some option assignments throughout the year and sell covered calls while volatility is higher, but now I’m getting ahead of myself.

I started off by saying 2010 was a let down for my investments and I’ll close to say it was a great year for my health.  I had another surgery on my neck and most of my pain is gone now and I’ve gotten into shape again after a multi-year lull.  Along with the renewed exercise program I dropped my cholesterol medication and feel better than I have in years.  I’m looking forward to a great year of finance, health and a happy family.  I wish all of you the same.