In the realm of investment, understanding the performance of stocks over time can be pivotal for making informed decisions. Recently, a discussion emerged in the Facebook group ‚Kleine Finanzzeitung‘ about the disparity between my recommended stocks and the broader MSCI World index over the last five years. While my selections have yielded only a 59% increase, the MSCI World has soared by 88.5%. This discrepancy begs the question: why?
Initially, a member sought insights from ChatGPT, which attributed my underperformance to specific stocks like Chipotle and Intuitive Surgical.
However, this analysis overlooked several crucial elements that contributed to the overall returns.
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Factors affecting stock performance
One of the main reasons behind the underwhelming performance of my stock picks is the high fees associated with the wiki Global Champions, which range from 2% to 3% annually. Over time, these fees accumulate, significantly impacting net returns. In contrast, my personal portfolio benefits from dividends on American stocks, which are not accounted for in the wiki, resulting in an additional 1% loss in potential earnings.
Impact of stock selection
Moreover, several stocks that once weighed heavily on my portfolio have since been removed, including Disney, Starbucks, and Nike. These stocks had previously constituted large portions of my investments, but I gradually reduced my positions as their performance faltered.
Additionally, two significant holdings—Novo Nordisk and Chipotle—are currently experiencing severe corrections, further affecting overall performance. I also have several turnaround positions, such as Peloton, Docusign, PayPal, and Etsy, which, despite showing signs of recovery, have not yet reached expected levels. In hindsight, I realize I may have jumped in too soon, leading to prolonged periods of underperformance.
Lessons learned from stock performance
As my experience with these stocks has unfolded, I’ve come to a few conclusions. First, I plan to approach turnaround situations with more caution in the future. Second, I aim to analyze the chip stocks and the performance of companies like Nvidia more critically.
Specific stock challenges
Reflecting on my struggles, the first major setback was with Disney. Fortunately, I had the foresight to halve my position early on and reinvest those funds in Netflix, a decision that proved beneficial. However, my reluctance to part ways with Disney ultimately cost me.
Starbucks, while I did attempt to mitigate losses by reducing my stake and transitioning to Chipotle, also suffered from my tendency to hold on too long. My most significant loss, however, came from Nike, which has seen a staggering 28% decline over the past five years.
Evaluating investments and future strategies
Turning to Peloton, it serves as a representation of stocks that have undergone a turnaround but still lag behind. Currently, Peloton boasts a 170% increase year over year, yet my initial investment was made much earlier. After enduring substantial losses, the stock must reach $11.50 to break even, with a target of $23 to align with where a simple investment in the MSCI World would be.
Looking back, I would advise against engaging in such risky turnaround speculations again. The trajectory of Peloton’s stock over five years reveals an 87% decline, underscoring my missed opportunity to exit at a more favorable moment. My optimism about the company’s future was misplaced, as it took longer than anticipated to achieve profitability and stability.
High-growth stocks and the current market
While my investment strategy in high-growth stocks has produced mixed results, some, like Crowdstrike, yielded impressive returns of 340% over the same period. However, overall, my experience with high-growth investments has been neither disastrous nor exceptionally rewarding. I would approach such investments differently if given another chance.
Finally, the acquisition of Nvidia stands out as a significant success. My investment has appreciated by over 1,500%, which would not have been possible without recognizing its potential earlier. Regrettably, I hesitated to invest more initially, missing out on an even greater return. In future investments, I plan to allocate a larger portion of my capital earlier on.
To conclude, while the MSCI World index remains a formidable benchmark, my journey highlights the challenges of outperforming it, particularly when dealing with high-cost financial products. With careful analysis and learning from past experiences, I am optimistic about future strategies.
