40 years of trial and error

For 40 years I've tried to find the ideal investment strategy. Five years ago I put it to the test.

By Jim Van Meerten Apr 23, 2010 10:59AM
About five years ago -- after 35 years of investing in stocks, mutual funds, closed end funds and ETFs rated top picks by others -- I decided I could do a better job myself.

I was reading Forbes magazine's "Best of the Web" and decided to take their recommendations. In that issue they recommended Marketocracy as one of the top stock market simulation games and Barchart as one of the easiest stock screeners to use.

Soon my funds were getting green stars from Marketocracy, meaning that they were beating at least 75% of the other 100,000 plus portfolios rated by Marketocracy. I begin asking questions in the forums and found the M100 guys -- those top 100 out of more than 100,000 -- to be very honest and giving of their time.

A few even encouraged me to enter a contest sponsored by Marketocracy, MSN Money Central and Investor Place Media called the Strategy Lab Open. The winner of the contest would get a chance to be in a Strategy Lab contest against some real professionals on MSN Money Central. I'm not sure how, but I won that contest and began writing articles for Top Stocks.

I have since retired and now write online columns on Barchart, MSN Top Stocks, Seeking Alpha, Main Street Investors and my own blog Financial Tides teaching others how to pick and manage their own investments.

This month Marketocracy gave top recognition honors to three of my simulated Marketocracy portfolios. They named my Barchart Jim Van Meerten Speculative Fund (VMSPC) to their M100.

Per their press release: "M100 members have proven long term track records, and serve as the ambassadors of our top performing members. We have thousands of excellent investors who are beating the market, but only 100 make this list at any given time. These members receive many benefits for their participation in the m100, including free premium memberships, posting privileges on our forums, press opportunities, and cash. Marketocracy pays all m100 members based on the assets under management with our affiliate, Marketocracy Capital Management. "

They also compared simulated funds that had been in existence over five years against the top 50 mutual funds with five-year track records. My Barchart Jim Van Meerten New High Fund (VMNHI) beat the #10 rated mutual fund, the Alger Speca A (SPECX) rated by Morningstar as a five-star five-year pick.

My fund was created in March of 2005 and has returned 76.36% since inception beating the S&P 500 return of 10.03% by 66.34%. Annualized results were 11.68% for (VMNHI) vs. 1.88% for the S&P 500, so I beat the benchmark by 9.81%.

They also compared my VanMeerten S&P 600 Fund (VMSIX) and found that my return beat the #27 top rated five-year return of Fidelity's Select Software (FSCSX) and rated by Morningstar as a five-star 5 year pick. My fund was created in November of 2004 and has returned 71.11%, beating the 13.76% return of the S&P 500 by 57.35%. The annualized rated of return of 10.44% beat the S&P 500 return of 2.41% by 8.03%.

What have I learned and how can you profit from my experience? When I was being interviewed as a finalist for the Strategy Lab Open, Ken Kam made an observation. He said, "you trade a lot of stocks but seem to sell losers right away." I've found that is the key to investing. Learn how to cut your losses and let your profits run. Sounds simple but discipline wins over brains.

In the VMNHI fund:
Best Winners -- Chico's (CHS) 266.42%+ and Panti Computers (PTI) 249.20%+
Worst Losers -- Premcor (PCO) 100.00%- and Epic Energy (EPCC) 57.60%-

In the VMSPC fund:
Best Winners -- Aixtron Akteingesellschaft (AIXG) 244.74%+ and Rural/Metro (RURL) 187.56%+
Worst Losers -- Elan Pharma (ELN) 69.26%- and Dollar Thrift Auto (DTG) 68.43% -

Anyone can pick stocks that beat the market. The key is knowing when to get out and preserve your profits. I formerly used a stop loss of 10% but found that too tight. I now use the 50 day moving average and seem comfortable with that. Please share your thoughts on stop losses in the comments section.

I'd like to thank Marketocracy for the recognitions and Barchart for the excellent stock screens.Please join me on my quest to beat the market by reading my blogs on Barchart, Top Stocks, Seeking Alpha, Mainstreet Investors and of course my own blog Financial Tides.
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