My 2012 Investments Explained

What a year for investing, huh?

If you decided to sit on the sidelines this year, you really missed out.

The purpose of this blog post is to inspire people that are hesitant to invest in “the dreaded market.”

Due to a potential conflict of interest, I’m not going to tell you what I’m investing in going forward. You’ll only find a recap of the investments I’m no longer holding.

My 2012 Investments Explained

A lot of investing columns are confusing to the “Average Joe,” so I thought I would take a minute to explain my investing decisions in layman’s terms.

• My 401(k)

The bulk of my wealth is now (didn’t use to be) in my 401(k) at work. I have been invested in 100% equities (stocks) for the past year – a nice mix of value stocks (good deals), growth stocks (earnings expected to grow), large cap (big companies), mid cap (kinda big companies), small cap (smaller companies), international (self-explanatory), and emerging markets (rapidly growing, ie. Brazil).

I am young (26) and very aggressive which explains the 100% allocation. Last week I backed it down to 80/20 (stocks/bonds) in order to stay in line with Benjamin Graham‘s suggestions.

401(k) 2012 Returns: 25.9%

Much better than the stable value fund, eh?

• My Roth IRA

My Roth IRA is invested in an aggressive growth mutual fund. I’m not extremely happy with the performance because (given the expenses for active management) I could’ve done better in an index fund. Nonetheless…

Roth IRA 2012 Returns: 10.95%

• My Brokerage Account

I keep about 10% of my investable assets in an online brokerage account. This is my emotional investing account as I often do things on a whim. I don’t recommend that anyone speculate like I do. If you can’t fight the urge, DO NOT use more than 10% of your total investments.

Here are the 2 positions I sold this year:

DG – Dollar General

The logic here was rather simple. I wasn’t feeling confident about our recovery when I purchased (August 2011). I knew that Americans would continue to spend, but with no money – there were only a few options of WHERE they could spend. Walmart would’ve been the obvious choice, but I decided to take a leap of faith with Dollar General. It paid off…

DG Realized Gain: 40.96%

SH – Proshares Short S&P 500

In mid-September, I told you all How To Bet Against The Stock Market. Remember this article? At this point, I thought the stock market was propped up artificially by the expected intervention of the Federal Reserve. I expected the stock market to contract (cool off) at least 5% before the end of the year. I used this hunch to purchase SH which (to simplify) moves in the opposite direction of the S&P 500. Once I got my 5% (a few days ago), I decided not to get greedy.

SH Realized Gain: 5.19%

Readers: How have your investments performed this year?