We will interrupt our regularly scheduled Monday stock pick to give you the first monthly update for year to date (YTD) performance as of market close 2/4. Although these updates in the future will be short in nature, we wanted to spend a little bit of time explaining the exact numbers behind how its calculated.
The return is calculated by investing $250 in each stock, using the open price on Tuesday morning of the week the stock pick is posted. We are also including a $12/month trading fee. Using Sharebuilder, you can buy fractions of shares (thus allowing a consistent $250/week investment) and you can get up to 12 free trades a month if you sign up for the $12 monthly program.
Basically, if you use Sharebuilder you can exactly replicate the results of the Thousandaire portfolio.
Here are the results after one month:
YTD Performance – 1.76%
Looking at a one month return of 1.76% is by no means phenomenal, but it is always exciting when you turn a profit. It’s also good when you compare it against other investments. Most savings accounts I’m aware of have a less than 1.76% annual return, so to get that in a month is pretty good.
However, the most significant comparison is the relative performance of the Thousandaire portfolio to the general market, or the S&P 500.
Thousandaire return: +1.76%
S&P 500 return: +1.69%
While this isn’t a great improvement over the market, it’s important to note that 50-66% of mutual funds (people who get paid tons of money to pick stocks) do not beat the market. I’m not suggesting that the Thousandaire portfolio is a replacement for a mutual fund; it just makes me feel good that we are doing better than some “professionals”.
What are the current Thousandaire holdings? In case you haven’t been keeping track of us on a weekly basis, here is a quick recap of our purchases over the last month as well as their individual performances. (This will be a graph in the future, but I’m out of town and my laptop doesn’t have Office)
- GE: 12.10%
- AMT: 3.80%
- BP: -0.65%
- BAC: 0.42%
- LVS: -5.15%
- POT: 9.30%
- F: -2.60%
The S&P 500 YTD return is listed as 4.23%; why is it listed above as 1.69%? The S&P 500 return of 4.23% is on any money that has been invested for the entire year. A number of Thousandaire stock purchases were done throughout January and February and therefore it wouldn’t be fair to compare it to YTD returns.
We have calculated the S&P return assuming that instead of the stock purchases above, the same amount would be invested into the S&P index fund. That means the batch purchased on Feb 1 would only have a return of 0.6% instead of the advertised 4.23%.
This is the only way to get a true comparison of our stock picks to the market. We are also including a $12/month expense for trading fees, just like we do for the Thousandaire portfolio (trades aren’t free people!).
What is the Thousandaire investment strategy? We focus on stocks that we think will outperform the market (duh!). Although anything goes, we try to find investments that show inherent value in their business model and brand. The idea is to create a realistic investment strategy that can be easily replicated by anybody. This can be easily replicated by anybody with a broker account and $250 a week to invest.
Finally, I gave The Hoff the week off because I just added a new stock to my own personal portfolio and I wanted to add it to the Thousandaire portfolio as well.
This week’s stock pick: Maxwell Technologies Inc. (MXWL)
I may not work as an electrical engineer, but I do have a bachelors degree in the subject, and investing in Maxwell is investing in the future of electric vehicles and green electric energy.
The main reason electric vehicles are so expensive and difficult to make is because batteries have a lot of limitations. Lithium Ion batteries are heavy, take a long time to recharge, can hold a limited amount of charge, and go bad after a certain number of uses. If only there were a way to improve on this technology, the electric car market could really take off. This is where ultracapacitors come in.
To summarize an capacitor for non-engineers:
- They can be recharged almost instantly (compared to minutes or hours recharging a battery)
- They are environmentally friendly (as opposed to battery waste)
- They last much longer than a battery, which can typically be recharged only a few hundred or thousand times
Maxwell is leading the engineering community in ultracapacitors, and these beautiful pieces of technology is going to be incredibly useful in making green vehicles in the future.An ultracapacitor is a regular capacitor on steroids. The engineers use clever ways to increase the surface area of the capacitor plates and allow them to hold more charge.
A capacitor by itself can’t power a car, but it can be very valuable in making electric vehicles run more efficiently. I could summarize a bunch of information for you, but I’d suggest you should just read this article instead.
You are well aware the Thousandaire portfolio is a big fan of picking a growing industry and buying the people that make that industry work (see AMT). This is a bet on green electric technology, specifically electric vehicle technology. As long as ultracaps are a part of the future, then Maxwell is going to be sharing in the profits.
Disclosure: I own MXWL
Important to note that ALL ideas, thoughts, and/or forecasts expressed or implied herein are for informational and entertainment purposes only and should NOT be construed as a recommendation to invest, trade, or speculate in the markets.
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