BlackBerry (NASDAQ:BBRY) has been a sour topic for me. I have been recommending BlackBerry as a sell since October (when it still traded as Research In Motion) and more recently as a target for put options. However, BBRY stock remains up 100% in the last three months despite my stubborn negativity.
I could waste my breath today restating why I still believe BBRY will fall. Instead, I’d like to make a few confessions:
- I make plenty of bad investment decisions.
- I sometimes let my personal experience or emotions color my judgment on an investment decision.
- I have no special secret sources, exclusive data or crystal ball and am investing simply based on publicly available information all investors can see.
But guess what? Despite all of this — and other more colorful shortcomings that friendly readers have been kind enough to point out — I made 15% in the market last year.
Looks like even a moron can have a good year, eh?
Index Investing: The Stupid Investor’s Friend
I am half-joking about being a moron, but I’m also half-serious.
After all, what hope does a small-time investor like me have of beating high-frequency trading algorithms or egomaniacal hedge fund managers arm-wrestling over Herbalife (NYSE:HLF)? Sure, I look at 10-Ks and read Barron’s, the Wall Street Journal and a host of investing blogs … but doesn’t everyone?
The hard reality is that picking individual stocks and timing the market is a fool’s errand for most of us. I’m not making an excuse for my botched BlackBerry call; rather, I’m painfully aware that there will be more miscues like this.
That’s why I rely heavily on index investing and diversified funds — and you should, too.
After all, the biggest reason I tallied a 15% total gain in 2012 wasn’t due to any particular talent on my part. About 40% of my nest egg is in Vanguard 500 Index Signal (MUTF:VIFSX) — a low-cost mutual fund tied in lockstep to the S&P 500 Index. Another 30% or so was in Harbor International (MUTF:HIINX), an actively managed global fund with top holdings like Novo Nordisk (NYSE:NVO), Diageo (NYSE:DEO) and SAP (NYSE:SAP). The Harbor International Fund tallied about 20% last year.
The rest of my portfolio (affectionately known as the vanity investments that, through hubris or naivety, I convince myself are sure to beat the market) obviously underperformed.
That’s how even a moron can beat the market.
Passive indexing is in fashion for a reason. According to Businessweek, Vanguard closed its best year ever, shattering records with a staggering $130 billion in deposits to its low-cost, index-based fund model.
Remember this the next time you make a bonehead call of your own.
I love the market, and I love reading about stocks. I’ll continue to dabble in the market, even if it means more moronic calls in the future.
But stupid as I might be, I’m not stupid enough to forgo the power of passive investing in index funds.
- P.S.: I remain convinced BBRY is doomed … though I have nothing more to add. I panned the new Z10 and Q10 phones at the January event where it changed its name. I suggested buying puts on RIMM. I started singing of its demise as early as this bearish piece in October and most recently in this smartphone stocks recap after great Google (NASDAQ:GOOG) results and a disappointing Apple (NASDAQ:AAPL) earnings call. Read these recaps if you care. (The Slant)
- Why most investors trade too much. (MarketWatch)
- 10 questions about index fund investing. (Mint.com)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he held a position in Apple but none of the other stocks named here.