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January 02, 2008

My Empty Stock Drawer

At the end of the calendar year, we have a little tradition when it comes to the stock market. Sell everything, and go completely into cash as the calendar switches from December 31 and starts again with January 1st. This year was no exception.

The reason behind my annual sell-off isn't the result of some chart-reading that tells me the market usually takes early January off (though sometimes it does). It also isn't because I have an innate need for a challenge, and see the move as starting the new year from scratch. Instead, it's simply that I do my own taxes every year, and don't want the hassle of tracking down individual trades that bridge a calendar year.

By making sure all my stock trades both begin and end in the same year, Intuit's TurboTax service can easily tabulate the gains and losses for each trade, and doesn't force me to dig through my eTrade records to see when a particular stock was purchased. Also, as I often buy and sell a single stock symbol multiple times in a year, I'm not left scratching my head and guessing where I should appropriately report I paid commissions. After all, if I have confusion, it's likely someone in the IRS will have confusion too, and might later ask me to clarify... leading to pain.

Clearing out my stock drawer (so to speak) also helps clarify what went well and what didn't over the year. There's no ambiguity as to whether one trade hasn't panned out yet or not.

So how'd we do?

IndexQ1Q2Q3Q4
Me+2%+4%+8%+35%
NASDAQ+<1%+8%+4%-2%


That looks pretty good on its face. We were up more than 50% on the year. But if I dig deeper, it's clear I could have done significantly better if I completely ditched my quick trade strategy and had instead put all my money into Apple and slept on it.

IndexQ1Q2Q3Q4
Me+2%+4%+8%+35%
AAPL+8%+31%+26%+29%


Being such an Apple guy, you'd think I'd have done the right thing, the smart thing, and given all I had to Cupertino. But I didn't. And while others have no doubt made out like bandits, I've ended up looking pretty silly, as the Mac and iPod maker more than doubled its market cap on the year.

I think a lot of people are looking pretty silly when it comes to AAPL. Even the most aggressive, pro-Mac guys, like me, couldn't have anticipated the kind of success Steve Jobs and team have delivered. But now, with Macworld approaching, and having cash on hand, maybe, just maybe, I'll do my part, and get back in the game. If I do, I promise I'll let you know.

Also See:

2005 Taxes in the Bag
The Stock Market Is Bleeding Us Dry
I Bet Wrong On AAPL, Again
Apple Stock Pays for AppleTV, New Airport Extreme
Taxes Completed Online, As Always
Top Eight Worst Stock Moves I Ever Made
Two Hours Of Apple Stock Plenty Profitable