Investing | Investment Strategy Update - Two Months

The past month has not been that great for the stock market in general, nor has it been even remotely good for the one U.S. stock I had chosen in my original investment strategy post. As always, lets take a look numbers and cool graphs:

Washington Mutual (WM)
Buy Date: 1/9/2008
Buy Price: $12.34 Shares: 185.74
High: $21.92 Low: $9.91
Closing: $18.06
Growth: -13.21%

Washington Mutual (WM) has been getting hammered in trading, losing 25% of its value in the past 5 days. The worst part is that I haven’t even been noticing. I pretty much no longer keep tabs on my stock and didn’t even notice the slide into negative territory. Now the stock may still have some significant long term potential, but it stings to think that I held a stock that went from growing 76% through the beginning of February to over 10% of its value. Though I only have this holding in my imagination, it is hard to see that I “lost” $2,250 on an investment of $2,500 from neglect. Hindsight, though, is 20/20.

It just seems to reiterate the idea that I had after last months update. It really seems like a good idea to set buy and sell numbers on individual stocks that you want to invest in, especially when they are highly volatile and risky like WAMU is proving to be. I would definitely prefer to lock in a 50% return on a stock than to hold onto a volatile stock for too long and break even or lose money. I could live with potentially being out of a stock that could, in very ideal conditions, end up returning 400% over a 4 year period for the peace of knowing that I just earned 50% on my money in one month. With WAMU in particular, I could simply buy in again if I thought the stock was heading up again since now it has dropped below my initial buy price. That would significantly increase my earning potential from the holding if it were to recover from the recent loss.

T. Rowe Price Africa & Middle East Fund (TRAMX)
Buy Date: 1/9/2008
Buy Price: $13.46 Shares: 202.59
Month High: $13.58 Month Low: $11.18
Growth: -0.30%

TRAMX has essentially recovered from its freak decline from last month. The growth has been slow and steady with most of the changes to the NAV coming in cents rather than dollars. In fact, all changes to this stock have been under 2% per day. I have been very impressed with the relative stability of this fund in comparison to Washington Mutual (WM), especially since when I started I supposed that both were relatively risky investments.

Lessons Learned
Over the past month the Dow (.DJI), the NASDAQ (.IXIC), and the S&P 500 (.INX) have seen losses between 3% an 6%. Washington Mutual has far outpaced the market, raking up a loss 41% over the exact same period. Risky stocks seem to have the power to wildly outpace the market performance over short periods of time. Just last month WAMU grew by 50% while all these three indexes all saw similar loses.

Then there is TRAMX. It has remained relatively even keeled over the past two months. With only slight dips and the anomalous drop on January 22, 2008 it has seen steady growth while the US has seen steady decline. Diversifying your investments across different continents seems to be just as important as investing them in different economic sectors. Washington Mutual is a bank and TRAMX invests mainly in banks in the Arab world. While one investment is tanking, the other is seeing steady and consistent growth. One is getting hammered by the sub-prime lending mess that mainly affect US banks where the loan originated while the other reaps the benefits of surging oil prices. World investing is here to stay.

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Categories: Investing ~ Tags: lessons learned ~ Trackback