Before we return to our basic investing series, here’s our final index report for 2011. When we started our SWI report on May 1, 2011, the Swatch watch was worth $57.89. It had sold for 50 Swiss francs or $50 in May 2010 when the currencies were about equal in value.
Today, SFr50 = $53.24. This is more due to the Swiss national bank’s efforts to bring down the value of their currency. Swiss exporters were getting killed by the huge increases in value, because their customers’ currencies were going in the opposite direction.
Our Model Portfolio went through some huge swings, just as the general stock market did. The MPI started on April 29 at $5,245.64. Today, it’s at $5,301.06, for a gain of $55.45, or 1.06%. This does not count dividends ($83) or brokerage fees ($35).
We had not “held” the stocks for an entire year, or the dividends would have been $122.40. Since we had held them for 8 months, or 2/3 of a year, we figured $83. So, the total gain in value for the period was $103.45, or 2%.
Cool, but factor in inflation, which by one measure was 3.4% for 2011. Horrible! That’s 1.4 percentage points higher than the gain in the MPI. So, we lost *value* if not actual $$. Not only that, we will have to pay some kind of income tax on that “gain.”
But wait! First, check the DJIA. It was at 12,810 at the start of the MPI and is now at 12,217, for a loss of 593, 4.8 percent.
Not only that – let’s say you had just kept the money in the bank. That’s the prudent thing to do, right? But with current interest rates the banks, or IFO’s credit union, at 0.09% to 0.75%, you are paying *them* to hold your money.
We know that mutual funds have been all over the map in returns. There are thousands. Check your own mutual fund(s), if you still have one in the face of IFO’s negative opinions.
Investment lesson: no matter how smart or prudent you try to be with your money, an irresponsible government can still cause your net worth to shrink. Grrrrr…..