November 11, 2016

Review 2016: Bought and lost

Obermatt CEO Dr. Hermann J. Stern finished investing the 100,000 Swiss francs that comprised the second portfolio he had started in spring. The goal was to invest 5,000 francs every week so that no more would be invested in any single stock or at any single point in time.

Professionals call this diversification and dollar-cost-averaging. Both rules are easy to follow and give you a better return in the long run. We certainly needed that because it has been a bad year for investing. So, thanks to going in slowly, we had almost the same amount invested in stocks as we had cash at the beginning.

Dr. Stern is also glad that he only invested 5,000 Francs in each stock, so any losses were limited.

He bought Nokia, which lost 18% of its value. He probably should have listened to one of his commentators, who wrote a poem when he posted this purchase. Here is a loose translation from the German original:


NO, it’s too stupid for that,

it can only do speaking.

When Dr. Stern read this, he thought, Nokia doesn’t make phones anymore! They sold it to Microsoft. So what’s all the fuss about?

The other losses are just as difficult to explain: he lost 16% on Electrolux (household appliances), 10% on Metro (retailer) and 9% on Smith & Nephew (medical devices). In most cases, it is very difficult to explain the market movements. Next week, Dr. Stern will talk about the gains. They are just as undeserved.

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