Model Portfolio athompson:TPSNX

I first became interested in picking stocks when I was in graduate school (in philosophy). I happened to find Peter Lynch's book One up on Wall Street in the public library. I think this was in 1991. I figured the book was worth a read since Lynch, unlike many self-professed investment gurus, actually did well in stocks. I was quite inspired by the book. Lynch made stock picking sound really fun. And what Lynch said made a lot of intuitive sense to me: buying stocks that are cheap, looking for stocks that others have overlooked, and avoiding the flashy, gee-whiz stocks that everyone else is salivating over.

Although I have read a lot about stock analysis since reading Lynch's book, most of what I do is based on Lynch's approach. I have primarily followed his advice about how to analyze a stock once you have become interested in it. For the most part, his advice to investigate the stocks of companies you know--as a consumer or in your work--has been less applicable to me. It's great when I find an attractive stock and I've had some kind of firsthand experience with the company, but unfortunately this doesn't happen often enough that I can build a portfolio of such stocks.

In 1999, I finally had enough money that I felt like I could invest some in individual stocks and not be too upset if I lost it. First I bought one stock; then a few months later I had saved enough money to buy another. I had some success; Barr Laboratories (BRL) was one of my early successes. I really enjoyed researching stocks and trying to find overlooked bargains. But in 1999 and early 2000, technology stocks were going through the roof and I was largely left out of that party. I began to feel better about my stock picking abilities later in 2000 when the market crashed and my stocks didn't go down much. I started a Marketocracy portfolio in October of 2000, shortly after Marketocracy started, I believe. The experience of managing a model portfolio on Marketocracy was incredibly valuable. I could really learn and test my abilities when I had the freedom to diversify appropriately, instead of being constrained by my actual funds. And it turned out that the strategy I was using really did work. I think I have learned a lot through the experience although much of what I've learned is probably at an intuitive level and can't really be articulated. I have learned to be more skeptical of high-growth stocks whose earnings cannot be readily verified. After investing in A.C.L.N. and watching go almost to zero, I've learned to pay a lot more attention to red flags that commentators, such as Herb Greenberg, point to.

In December of 2004, I became a Registered Investment Adviser in Pennsylvania. So far, I have been managing mostly small accounts for friends and a few family members, working part-time while holding down a full-time job in an unrelated field--standardized testing. Now that I have a track record of managing actual funds, in addition to my Marketocracy track record, I am ready to seek additional accounts so that I can work full time as a portfolio manager. I am also continuing my education in finance and investing by pursuing the Chartered Financial Analyst (CFA) designation. I passed the Level 1 exam in June of 2005. I have decided that I currently do not have enough time to study for the CFA exams. However, I will begin studying for the Level 2 exam as soon as I can devote myself full time to investment management and studying finance.

Posted by Adam Thompson at 5:31 AM | Permalink