Monday, February 15, 2016

Rescue My IRA: 2015 Annual Results

The Rescue My IRA year-end post for 2015 is long overdue – here we are in February already!  But we have a snow day and I just got my recordkeeping for January and February caught up, and I’m motivated, so I think I might go ahead to put together a wrap up post.  This is the fourth full year of running the account using a covered call strategy; this report covers the January through December 2015.

Rescue My IRA followed a winding road in 2015, ending the year
almost exactly where it started!

 Bottom Line Up Front – or “BLUF,” as we like to say at my office: Rescue My IRA started the year with a statement balance of $167,659.68, and ended the year at 167,609.77.  While that is technically a loss of -$49.91 on the year, it’s basically breakeven since the percentage is -0.0003%! 

Meanwhile, my benchmarks of the DJIA returned -2.20% on the year, and the S&P 500 returned -0.70%, so I suppose that you can say we outperformed them.  But you can also say that nobody is happy about it.    

Long-term Performance – in dollar terms, the account’s statement value has increased from $127,606.44 at the start of 2012, to $167,609.77 at the end of 2014, a gain of nearly $41K.  Besides the DJIA and S&P 500 results, a third benchmark I use is a goal of a 12% annualized return. Here’s a summary of the results, by year:

2012: 4.11%
2013: 16.31%
2014: 8.50%
2015:  0.00%

The average annual return for these four years is 7.23% - that’s not bad, but it is short of the 12% goal I’ve set for Rescue My IRA – and it basically matches the long-term average return on the S&P 500.  Looking at it another way, the calculator at http://www.moneychimp.com/features/market_cagr.htm suggests I could have done more like 15% or so from 2012-2015.   

Analysis – as we did last year, here’s an assessment of why Rescue My IRA falls short of the benchmarks on annual basis:

First, I am a “small time, retail investor” – as such, my fees are fairly high, and I don’t spend all of my time managing the Rescue My IRA account at Scottrade, although I do find time to check in on it every day. 

Second, while I started the year with the goal of getting most of my cash reserve in the market, and was able to get down to 5% cash, by mid-year I had reassessed and set a goal of getting the reserve up to 30% by October – eventually getting to the 25% level.  Hindsight doesn’t lend itself to determining whether staying fully invested would have improved performance – or worsened it! 

Finally, I only invest in S&P 500 stocks as part of my risk management approach, focusing on shares that are rated 4- or 5-stars, and further limit my selections to dividend payers in the range of from 2% to 5% annually.  This approach may limit how many home runs I get, but it does reduce my risks as well.

All of that said, the conclusion I’ve come to is that I don’t have anything to complain about with these results.  I have a good feeling about what I’m accomplishing by being in control of the investment choices and approach in Rescue My IRA – and that is one of my primary goals for this account. 

Resolutions for 2016 – it’s now traditional to end the annual results post with some resolutions. 

By the way, I did not accomplish either of my resolutions last year, which were to find alternatives for putting my cash reserves to work, and to work on revising the Rescue My IRA trading plan.  I suppose I can account for this by saying I was keeping busy – I taught a graduate level class at Catholic University in the spring, and I started a farm, called “Hawksbill Hop Yards,” on the side…but this year will be just as busy, since I’m teaching again, continue to run the farm, and will open a brewery this fall – so I guess I won’t hold out much hope for achieving anything I write this time either!     

I still would like to find a way to put the cash reserves to work while they are not invested in stocks.  Going forward, I’ll probably settle on 20% as the target reserve amount, so maybe keeping half of that in CDs or bonds will work.  The remaining half would be for liquidity purposes.
Retooling the trading plan seems like a low hanging fruit goal, so I’ll try and take this on, especially if I come up with a way to achieve resolution number 1.  As I wrote last year, now that I have a few years of experience with this approach, there are probably some insights I can apply to improve my results by a few percentage points (but there won’t be major changes). 

That’s it for the tardy 2015 wrap-up.  It’s onward and upward for Rescue My IRA, and I will continue to use the covered call approach for 2016.       

I hope my readers were more successful with their accounts in 2015 than I was – and here’s to happy trading next year! 

No comments:

Post a Comment