Who doesn’t love a throwdown? Some friendly competition?
Especially with real money on the line?
It’s time to Play the Ultimate Match: let’s see what happens when I face-off against 14 finance bloggers in an Investing Throwdown!
“The what?! Throwdown?!”
“Are you drunk?”
Yeah, yeah, I know. I wrote that intro with my best WWE sports announcer voice running through my head. Grrr!
Okay, fine. Competition ain’t my style.
But I do love a challenge. So when a handful of finance bloggers challenged me to beat their investments in a quest for the ultimate investing triumph, I thought:
Here’s how this breaks down:
#1: On January 1, fourteen finance bloggers – including yours truly – invested $1,000 into the stock market.
#2: We picked any investments – stocks, index funds, ETFs, bonds.
#3: We can place trades as much (or as little) as we want throughout the year.
#4: We track our progress for a year.
#5: We crown a victor. Victory!!
Let me take a moment to say: I realize we’re making investing sound like a sport. And it’s not a sport. It’s a sober, analytical … zzzz.
Here’s the deal:
I think investing is awesome. Maybe you do, too.
But there are millions of people who associate “investing” with stodgy and stuffy and boring.
So I want to get people pumped. I want you to leap off your couch and yell, “Bring it on!!”
And when 2014 is over, I want you to keep investing …
…. for the rest of your life.
You MUST invest to grow wealth. Plain and simple. So I’m trying to make investing awesome.
Now: It’s time for some friendly competition. Let’s roll!
Can A Blindfolded Monkey Beat the Financial Experts?
In 1973, Princeton professor Burton Malkiel wrote a must-read book called A Random Walk Down Wall Street. It became a mega-bestseller and is now regarded as an investing classic.
“A blindfolded monkey throwing darts at a newspaper’s financial pages could beat most experts,” Malkiel famously asserted in the book. (That line is classic pop-wisdom among the Investing Geek crowd.)
I want to test if that’s true. But I can’t find an actual monkey.
So I’m going to imitate a monkey, instead. (It isn’t a far stretch.)
Here’s my 3-step investing strategy:
Step 1: Blindfold myself.
Step 2: Throw darts at a list of stocks.
Step 3: Buy stocks.
How many stocks? Ideally, I’d love to sink $100 into 10 stocks. I don’t want to sink the entire $1,000 into just one company. #Risky
The problem? Fees. Most companies charge $4 – $10 each time you place a trade.
That means I can’t buy 10 different types of stocks. I’d lose $200 in transaction fees — $100 when I buy and $100 when I sell.
That’s a 20 percent loss – right off the bat. Ouch!
But I did some digging, and I discovered a company called Loyal3, which lets me buy-and-sell stocks with zero commissions or fees.
It’s totally free.
So … time to pick the players. Which companies will compete on my team? Check out this one-minute video:
(If you can’t see the video, here’s a direct link to it on YouTube.)
And the winners are ….
- Berkshire Hathaway
- Discovery Communications
- VF Corporation
Here’s what I did.
On Christmas Day, I moved $1,000 into my Loyal3 account. On New Year’s Day, I bought $100 worth of each of these companies. Let the games begin!
But wait!! I need to compare this to some alternative.
So I created a benchmark:
I stuck another $2,000 into an EverBank Money Market account.
Everbank offers one of the highest interest rates on the market, so this investment will be the benchmark comparison between “playing it safe” in a high-interest money market account.
They require $1,500 to open the account, so — to simplify things — I rounded up to $2,000, and I’ll divide my gains by half when I’m reporting the results on this blog.
We’ll also watch how the overall market performs throughout this year. We’ll compare our stock performance to the general economy … and see who wins.
Let me end with a few disclaimers:
#1: There ain’t nothin’ scientific about this. It’s an experiment. A quest for victory. A game (of thrones.) It’s not intended to “prove” anything. Don’t draw any conclusions from the results. This is just for laughs.
#2: Stick with index funds for the vast majority of your portfolio. Invest in stocks with your “fun money” – that extra 10 percent you’ll use to take some risks.
#3: Don’t throw darts, while blindfolded, when your boyfriend is standing in the line-of-fire. #Oops
Full Disclosure: Some of the links in the post above are “affiliate links.” This means if you click on the link and purchase the item, I will receive an affiliate commission. It won’t cost you anything extra. I only recommend products or services I use personally and believe will benefit my readers.