At the beginning of the year, I joined another investing challenge. This was sponsored by Motif Investing, who provided me and several other financial writers and bloggers $500 to invest in strategies each of us would choose. Like last year’s Grow Your Dough competition, this is a relatively short time horizon for me. In 2014, I invested in the brands behind some of the products I use the most: Microsoft, Google, Samsung, Honda, and Canon.
I invested using ShareBuilder, whose $6.95 transaction fees ate away ravenously at my gains both when I bought the stocks and ETFs at the beginning of the year and when I sold. This year, Motif Investing is the sponsor, so I am using that particular platform. After some time, I’ll put together a review of my experiences as a customer of Motif Investing. At this point, I can say it adds a social element to investing, allowing investors to create buckets of investments (to add to Motif’s own buckets). Investing in a bucket, either of your own creation or of someone else’s, requires paying just one fee of $9.95. And because each bucket can contain a number of stocks or other investments, it can easily work out to be a lot less expensive than ShareBuilder and many other discount brokerages.
With Motif Investing, your “friends” linked to your account on Motif Investing can comment on your investments and share their own market analyses. I have yet to decide whether this is a good thing; the financial news media is all ready full of so-called investment experts making predictions about the stock market; now everyone can fashion himself or herself an expert — though you can view someone’s investing performance as proof. If short-term investing results don’t even matter in the long run, this might as well be as useful as a gambling scorecard.
Here’s how I approached my participating in the investing challenge with Motif.
Following the precipitous slide in oil prices at the end of last year, and with the accompanying gas prices hitting lows not seen for years, I once again used some money — an amount whose potential loss wouldn’t hurt my financial condition — to make an investment where I thought I’d be able to buy low and sell high.
Using Motif’s tools, I created a bucket that focuses on energy, mostly oil and gas.
These are the investments I added to my Motif bucket at the beginning of the year, and in which promptly invested about $475:
|VDE||Vanguard Energy ETF|
|BNO||United States Brent Oil ETF|
|BOIL||ProShares Ultra Bloomberg Natural Gas|
|OIL||ProShares Ultra Bloomberg Crude Oil|
|TAN||Guggenheim Solar ETF|
|XOM||Exxon Mobil Corporation|
If you’ve following along with the markets, you probably have a good idea of how this strategy is working out so far. My investments at Motif are already down 13%. The price of oil keeps going down, and prospects for the immediate future look grim. A Saudi prince and the nation’s oil minister seem to be warning the world that oil is in a state of over-supply and under-demand, and we may never see oil at $100 per barrel again.
But even if this is true (although the pattern seems to point to investments always finding new highs — eventually), most commentary seems to point to the price of oil rebounding eventually. So the investments I chose may have some rocky times before recovering. If I could, I’d use further dips as opportunities to invest at an even better bargain, but this competition is limited to the initial %500, and further trades would result in more transaction fees, which I loathe.
On the one hand, investing in oil at the beginning of 2015 with an eye for a recovery by the end of the year may not have been the best choice of an investment. I am solidly in last place, number twenty out of twenty, in the competition’s leaderboard after one week. But there is a whole year ahead of us, and I tend to invest for the long term. If the big oil producers are manipulating the market’s supply to allow the smaller producers, like those behind fracking in the Untied States, to fail, eventually that strategy will change, and the traditional oil sources will want their investments to grow.
Personally, I’d like to see a variety of energy sources eventually overtake those that are damaging to the environment. I’ve included a solar energy ETF in the portfolio to reflect that. I think, though, that oil production is still a major factor in the global economy, and despite warnings about “peak oil” for decades, the resource isn’t drying up anytime soon.
You can also see the leaderboard above, if you are reading this article on shizennougyou rather than on a newsreader, in email, or on another website. Follow along with the twenty of us where we go to show that stock picking is generally a bad idea in the short-term, and people are better off, if investing at all, leaving money in an index fund that tracks the stock market as a whole. If I had done that with my Motif Investing pot of $500, my account tracking the S&P 500 would be down only 1.5% so far this year.
With all the negative news about the price of oil, I figure it’s got to go up someday. Here are a few gloomy articles.
- Oil tumbles 5 percent to new low on Goldman price forecast cut. (Reuters)
- Heating oil price dips into comfort zone in Rhode Island. (Providence Journal)
- Saudi Prince: Oil will never return to $100. (CNN Money)
- OPEC price war in Asia intensifies as oil falls below $50. (Reuters)
- A Crude Oil Bottom: Where To Look For Clues. (Seeking Alpha)
- Slump in oil drives down equities around the world. (Reuters)
- North Dakota county feels Bakken boom ebb away as oil falls. (Reuters)
One of the investment advisers I talked to recently but together a potential portfolio for me, and it included commodities, but mostly as a hedge. I have been talking to money managers at some large banks and investment houses (Wells Fargo Advisors and Merrill Lynch) to discuss strategies for my investments, and ways to use my nest egg to my advantage. For example, my asset level will allow me to qualify me for super low interest rates on loans — but in certain circumstances. And loans might be helpful as I look more into investing in businesses, doing more work with start-ups, and helping finance a nonprofit organization.
I’m not making any changes yet, but I’m considering the options that are available to me. I don’t like the idea of anything that’s going to cost me more money, but at a certain level of assets, even those tiny management fees (expense ratios) on Vanguard’s index mutual funds add up to a lot of money lost every year due to fees.
Do you think it’s a good idea to invest in oil or other energy investments right now? What would be your choice for investing $500 with a goal of having the best returns at the end of the year? Or shall we just stop encouraging market timing completely? I know if I absolutely needed my investment at the end of one year, I’d leave it invested in cash. And a cash investment this year might beat out oil, stocks, or bonds, anyway. But I don’t think so. What would you do?
Published or updated January 12, 2015.