If you’re one of the unfortunate souls whose investment portfolio is taking a beating this year, then there’s a good chance it’s because you’ve overdosed on low-octane, underperforming stocks.
And as usual, the financial damage caused by errant stock picks is predictably painful and swift.
This past year alone, Washington Mutual (WM) has lost more than 70 percent in value, Office Depot (ODP) more than 60 percent, MGIC Investment (MTG) more than 60 percent, Freddie Mac (FRE) more than 45 percent, and Level 3 Communications (LVLT) more than 44 percent.
Market losses this dramatic are devastating both financially and emotionally. So how about an early spring cleaning for your portfolio?
If you’re sitting on big time stock losses, don’t despair. If you’re smart, you can still turn some of your lemons into lemonade.
For example, you can substitute your stock losers with broader and more diversified exchange-traded funds (ETFs). Making this kind of move can help you to reduce your risk and limit the potential of even greater future losses. While individual companies can go completely out of business, legitimate industry sectors generally survive.
By unloading your losing stocks, it can also help you to be tax savvy investor. Losses can offset any capital gains you earn during the year. Furthermore, $3,000 worth of capital losses can be deducted from your ordinary income.
Many of the lousy stocks listed below have been touted and cheerleadered by the financial media and Wall Street’s talking heads. Yet, the financial damage incurred by their money losing advice is broad and far reaching. I guess we shouldn’t be surprised though, because listening to financial perverts almost always leads to perverted results, right?
By matching up these lousy 30 stocks with their corresponding industry sector ETFs, I’ve done the heavy lifting for you. Now it’s up to you to rid yourself from the counter productive investments that are preventing you from thriving.
I’ve listed the low cost broader industry sector ETFs first and the more narrowly focused sector funds thereafter. Also, I’ve purposely avoided listing ETFs that use alternative weighting schemes and don’t follow true market indexes.
As these 30 losers clearly demonstrate, stock picking as a core investment strategy is a dangerous art that often leads to big time losses. This undying truth applies to both professional and amateur investors.
Beware of Wall Street’s flunkout stock pickers who suffer from data misinterpretation deficit or “DMD”. They will relentlessly try to convince you that my list of losers proves you need to pick your stocks more carefully, but beware! More homework is not the answer - having the right investment philosophy is!
If you want to gamble on individual stocks, only do it with money you can afford to lose. That’s the bottom line. The money you truly care about, also known as your “serious money,” should be indexed to the market. Always remember to trust the indexes, not the stock pickers that try to beat them and fail!
30 Lousy Stocks, 30 ETF Alternatives
|
Company Name
|
5-Year Return
|
Industry Sector
|
ETF Alternative
|
|
Tenet Healthcare (THC)
|
-20.9%
|
Healthcare
|
XLV
|
|
New York Times (NYT)
|
-15.7%
|
Media/Publishing
|
XLY
|
|
MBIA(MBI)
|
-14.3%
|
Insurance
|
XLF, KIE, IAK
|
|
Ambac Financial (ABK)
|
-13.7%
|
Insurance
|
XLF, KIE, IAK
|
|
Washington Mutual (WM)
|
-13.1%
|
Banking
|
XLF, KBE
|
|
Fifth Third Bancorp (FITB)
|
-12.9%
|
Banking
|
XLF, KBE
|
|
Boston Scientific (BSX)
|
-11.4%
|
Medical Equipment
|
XLV, IHI
|
|
MGIC Investment (MTG)
|
-10.7%
|
Finance
|
XLF, KIE, IAK
|
|
Interpublic Group (IPG)
|
-10.4%
|
Advertising
|
XLY
|
|
Gannett (GCI)
|
-10.0%
|
Media/Publishing
|
XLY
|
|
First Horizon National (FHN)
|
-9.3%
|
Banking
|
XLF, KRE
|
|
Level 3 Comm. (LVLT)
|
-9.1%
|
Telecommunications
|
VOX
|
|
Freddie Mac (FRE)
|
-8.3%
|
Finance
|
XLF
|
|
JDS Uniphase (JDSU)
|
-7.6%
|
Telecommunications
|
VOX
|
|
Fannie Mae (FNM)
|
-6.7%
|
Finance
|
XLF
|
|
Liz Claiborne (LIZ)
|
-6.7%
|
Clothing & Accessories
|
XLY
|
|
Popular (BPOP)
|
-6.3%
|
Banking
|
XLF, KRE
|
|
XL Capital Ltd. (XL)
|
-6.0%
|
Insurance
|
XLF, KIE, IAK
|
|
Micron Technology
|
-5.7%
|
Semiconductors
|
XLK, XSD, IGW
|
|
Countrywide Financial (CFC)
|
-5.6%
|
Finance
|
XLF
|
|
Diebold (DBD)
|
-5.1%
|
Computer Hardware
|
XLK, VGT
|
|
General Motors (GM)
|
-3.2%
|
Automobile & Parts
|
XLY
|
|
Tellabs (TLAB)
|
-2.1%
|
Telecommunications
|
VOX, IYZ
|
|
Office Depot (ODP)
|
-1.2%
|
Specialty Retailer
|
XLY
|
|
Omnicare (OCR)
|
-0.6%
|
Healthcare/Pharmaceutical
|
XLV, XPH
|
|
Sprint Nextel (S)
|
+1.7%
|
Telecommunications
|
VOX, IYZ
|
|
Rite Aid (RAD)
|
+2.6%
|
Drug Retailers
|
XLP
|
|
Advanced Micro Devices (AMD)
|
+3.0%
|
Semiconductors
|
XLK, XSD, IGW
|
|
Masco (MAS)
|
+3.3%
|
Industrial Goods
|
XLI
|
|
Electronic Data Systems (EDS)
|
+4.0%
|
Computer Services
|
XLK, VGT
|
Performance returns through 2/22/08 from SunGardMarket Data Services
|
