Sunday, March 31, 2013

Starting to Be Afraid

I completed my quarterly analysis of my investment performance this weekend.   The good news is that our investment portfolio gained 11.3%, even though we are about 70% in cash.   The bad news is the last time our results were that good was the second quarter of 2007.   Soon after that, the housing bubble burst and the Great Recession of 08/09 occurred.

While I''m excited about the first quarter 2013 results, I'm concerned for two reasons.  First, I'm not that good of an investor.  My results are mostly correlated with my company stock, in which I'm leveraged due to company stock options.  After three years of mediocrity, the stock price has advanced 10% during the first quarter.  If the stock price should drop, my gains would fall even faster due to the leverage.  Unfortunately, the cost of buying put options as downside insurance is prohibitively expensive.

Second, the first quarter rate of gain is unsustainable.  The stock market or my company stock is very unlikely to advance at the same rate in the second quarter.  If either the market or my company match the advance of first quarter, I will definitely accelerate my selling during the second quarter and buy some puts to protect my stock option gains.

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This is not financial or investing advice. Please consult a professional advisor.

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