« Stocks Only Q&A: 2007 Performance | Archives | The Earnings Question »
Friday, January 04, 2008
A Letter To Readers
For the past few weeks, it was a good time for rest, reflection, evaluation, and planning for 2008. I think it was time well spent and, like many of you, I'm well motivated to achieve great things in the coming year. I've always enjoyed the process of taking time to reflect and think, as well as to seriously evaluate what I'm doing and whether I'm reaching my goals. As the great philosopher Socrates once said, "the unexamined life is not worth living." How very true.
In looking back over what I've achieved in my lifetime so far, along with lots of good luck & strong family support, my achievements have come from consistent goal setting, discipline to achieve those goals, and hard-work. I've also been very fortunate to do what I want for a living and to structure my life in a way that matches both my skills and personality. The key to success, as I've said many times, is to make a career from what you love to do and I've been fortunate to do exactly that.
However, I have finally come to the realization that in recent years I've become so focused on my daily activities and responsibilities that I simply haven't been doing a good enough job of staying focused in the right way to make sure that I'm using my time and skills effectively. In essence, I do not believe I'm on the right track both with my professional and personal goals.
Upon extensive contemplation and intense soul-searching, I have decided to make some very tough decisions that will significantly impact what I do and how I do it. No goals worth achieving come without both sacrifice and change and the goals I've set for 2008 will require a great deal of both.
The Membership Survey
I do surveys because I really do care about what members think about the website. It serves as both a report card for me, but also helps me understand ways to improve the website and to change as needed. Unlike politicians who will say and do what they think most people want them to do, I will consistently seek to improve this website but ultimately I will make decisions based on what I think is best for all of us. After all, popular opinion isn't always the right opinion and it takes leadership to make and stick with tough decisions.
With that said, here are some things I learned from the survey:
Members feel good about their membership. 48% said they love it, 51% said they like it, while 1% said they could care less. Fortunately, no member said they dislike or hate their membership
98% of members feel they are getting good value from their membership
The top five favorite members' only offerings are: stock screen machine, after hours posts, premarket posts, Q&A ask me anything, and stock filters
The top 5 least favorite members' only offerings are: guess this stock, extras (golf, family, trips, etc.), retirement investing posts, book reviews, and the model retirement portfolio
The negativity expressed regarding the "guess this stock" posts I did were extremely high
The trading portfolio/track record received lukewarm ratings
Although most members think my link posts are "just right," 30% of members thought they are too long and need to be shorter and more concise
Within my link posts, members' most liked links offering opinions/predictions, stock picks, investing, and education. The least popular links were those to lazy portfolios, personal finance, and fun/extra links I share
A slight majority (62%) of members want me to do occasional software/product reviews
83% of members have found the stock screen machine helpful
Members supplied a number of very helpful suggestions on how to improve my stock screen machine
94% members wanted me to take a much closer look at specific stocks showing up in my stock screens
Outside expert Q&A sessions were still popular and 41% of members want me to do more than just 4 outside expert Q&A's per year
Members also supplied a number of recommendations as who they wanted me to interview in future Q&A sessions. Popular recommendations were Jim Cramer, Warren Buffett, Ben Stein, Ben Bernanke, and Jim Rogers
When asked what I should tell those who ask me why they should become a member, I received tons of interesting and helpful suggestions
In addition, a lot of helpful comments were received concerning future improvements/upgrades
In the second part of the membership survey, members took time to share insight about themselves and their opinions about the market. Like last year, I plan to dedicate a number of posts this month concerning topics covered in this survey including members' New Year's resolutions, where members' think the market will go this year, which sectors will outperform and underperform, popular themes and trends, predictions, and so forth.
Nevertheless, there were two survey questions that I would like to focus some attention on. Namely, I was disappointed to discover two things: 1) only 62% of the members said they beat the S&P 500 in 2007, and 2) when I asked members to give themselves a letter grade for their results in 2007, the majority said they deserve a C+. In essence, only a slight majority of your beat the market in 2007 and most were not that happy with their performance.
While I think I've been helpful to members and I'm very grateful to see so many members feel good about their membership as this survey showed, at the end of the day, performance means everything. And, clearly, there is a tremendous room for significant improvement.
When 38% of members fail to achieve the performance of the S&P 500 in any year (which anyone can do simply by buying an S&P 500 index fund or ETF), I need to figure out ways to fill the information/education gap. In fact, with relatively poor ratings provided to my coverage of "lazy portfolios" and "retirement investing," it provides me with an important clue that members still do not understand the importance that passive investing plays in their long-term success. This is something I will have to remedy in the coming year. Although I spent a lot of time early last year covering retirement investing and lazy portfolios, I think the performance stats show that most are not using these strategies. At least not effectively. I suspect based on questions I receive that many are trying to either outsmart these passive systems or are not sticking to them when faced with a challenging market.
Although it is not my responsibility to make members do well in the market (nor should it be) it does matter a great deal to me that members find more success in the market. After all, that's the website's main purpose. At a minimum, I should think that at least 80% members should match or beat the market's performance or I'm simply not doing my job!
A Labor Of Love
As many of you know, this website is a labor of love for me and I do it because I think I'm being helpful to others and enjoy the writing/sharing process. In fact, I've often thought in the past I'm a better trader/investor as a result of sharing what I know and the things I think are important though this website. But, after three straight years of sub par trading performance, I have finally forced myself to face the reality that this is simply not true. Failure to achieve my own performance goals for three straight years in a row is more than enough evidence that something is wrong.
I made an agreement with myself at the start of 2007 that I would give it another year and, if I failed to hit my performance goals again, that I would make some substantial changes in 2008. Since I consider my performance in 2007 atrocious and unacceptable, I must take swift action to right the ship and get back on the right track. A disappointing +13.6% gain is enough evidence to show that I'm not applying my time and skills to my best ability, especially when compared with prior years.
Not Enough Time To Trade?
At around this time last year (if not a little before that), I was starting to realize that I was losing control over how I spent my time. After several discussions between me and my most trusted advisor (my wife), I decided to closely track the time I spent on my work through the entire year using special time tracking software. Everything was I did (both for work and for fun) was tracked so I would have a much better understanding of how I was spending my time and whether I need to make changes and re prioritize my work. Like I've often said at the website, you often get what you put into your trading and investing and my performance shows that I have not been putting the hours in the way that I should to achieve my goals.
Although I make it look easy, I think very few people really understand the sheer amount of time and effort it requires to produce the website. In 2007, I worked an average of 65 hours per week - Monday through Saturday - and here is how I spent my time last year:
- Writing & Preparing Posts: 29 hours per week
Answering Email: 17 hours per week
Website Management & Tasks: 7 hours per week
Stock Screening: 6 hours per week
Investment Research: 3 hours per week
Q&A Sessions: 2 hours per week
My Training & Skill Development: 30 minutes per week
Trading & Related Tasks: 30 minutes per week
As you can easily see, the time dedicated to trading, skill development, and research are at the bottom while tasks directly related to the website are at the top. Is it no wonder then why my performance and trading goals are not being hit? I have been violating one of my most trusted and valued beliefs - that the work and effort you put into your trading makes a difference between success and failure in the market. At best case, I'm a very part-time trader, if that.
It doesn't take much to understand that I'm simply not spending my time in a way where achieving my goals is even remotely possible. In fact, there's no balance. Frankly, the most remarkable thing about this is that my performance hasn't been worse given the little amount of time I dedicate to my trading and research. Looking back just to last year, if I hadn't stepped up to make some very aggressive trades at year-end, my performance would have been even worse.
I know it will come as a great shock to many that preparing posts, answering email, Q&A sessions, and various website management & tasks fill up over 50 hours per week. But, it is true, I really do work that much. I was shocked when I started tracking the stats last year and couldn't believe that the amount of hours and effort that go into it. I enjoy it so much that it was convenient for me to ignore how I was really spending my time and what dire ramifications it had on my performance as a result. But, facts do not lie.
Change Is Needed
Clearly, I must change the way I spend my work time. Although I heavily considered it over the past couple of weeks, not doing this website is simply not an option for me. I enjoy it too much and it provides me with a sense that I'm being helpful to others. I know that I've made a positive impact on many people. In fact, just in the past few weeks alone, I had dozens of members write in to express their gratitude for the website and for all that I do. Even in spite of what many consider to be a challenging market in 2007, I was told by at least 30 members that they had their best year ever and that I helped them achieve it. Everyone should be so lucky to have a job where you feel like you're really making a difference in others in this way. Helping others achieve their financial goals in the market is a privilege for which I am very grateful.
But, with all things, there must be balance. Blogging and the website have literally taken control over my life and I'm not happy with how I'm spending my time. In addition, it is irresponsible for me to not find out how well I could really do in the market. If I can outperform most portfolio managers by spending as little time as I currently do on trading, just think of what I could achieve if I dedicated more time and energy to it.
Financially speaking, I'm never going to achieve my own financial goals through blogging. The money I receive through membership fees only slightly offsets the time and money I put into it. Since I refuse to sell advertisements (that will never change), engage in quid pro quo marketing arrangements with others (not going to happen), and do not want to increase the membership fees (so it remains affordable to new and little guy investors) even amid substantially higher operating costs, some tough business decisions are required.
Big Picture Goals
My two big picture goals for 2008 include the following: 1) significantly improve my trading performance with a minimum +35% yearly rate of return, and 2) continue to help others through the website. Everything I do professionally stems from these two goals. So, how do I achieve both? Here's my plan.
My Plan
As I see it, there are three ways that I need to improve:
First way to improve: Allocate more time for trading, research, and skill development.
The biggest time problem I have is answering email. 17 hours a week - 68 hours a month - and almost 37 full days per year is out of control. I also estimate that only 5% of the email I respond to is necessary. I receive a lot of questions and more than a few members think they've hired me as their personal research assistant/advisor for $50 per year. Abuse is rampant and I've got to get the email beast tamed.
Solutions:
A) Make upgrades to the website so that members can take care of routine membership tasks on their own through the website. For example, if members need to change their email address, modify their user name/passwords, or find out when their membership expires, they should be able to do that only through the website without any assistance from me. (I expect this to be done by the end of the month through the a new membership page).
B) Although I would like to answer every question asked (which has been my policy in previous years), I simply cannot do that any more. The membership has grown to the level where doing that just is no longer remotely possible. The problem is that some of the questions I receive are useful and important and my replies to them would be helpful to everyone. Starting next week, I will begin a new weekly feature called "Mailbag." Every Friday, I will select a few questions to answer. Questions will be selected based on popularity, relevance, and how helpful my answer will be to others. Unfortunately, not all submitted questions will be answered as I will pick and choose from those submitted. In essence this will be a small version of an "ask me anything" Q&A but instead of 4 times per year I do it every week. I think it offers a reasonable compromise.
C) No email during trading hours. As a new rule, I will not answer email during trading hours for any reason. That time will be reserved exclusively for trading. I may still post and do intraday updates at times, but when the market is open, my focus and concentration will be on trading.
D) All email received will be filtered and prioritized into three main groups: Member support (For problems with your membership that require personal attention. Some examples include trouble accessing the website, requests to change your email address, and problems with a specific website function), Mailbag Questions (Questions about investing, trading, stocks, or how best to utilize The Kirk Report. The vast majority of email I receive should be sent here and used for the weekly mailbag post); Suggestions & Feedback (In addition to the surveys I do, this will allow you to send feedback, correction, etc. that you want me to know). Among the three above, only member support requests will receive personal replies. In addition, email received from the free website will filtered in the same manner and will receive a slower response rate. Email received from members have always taken higher priority, but this will be even more true in 2008. Direct email sent to email addresses I've used in the past will not be received so to send me messages, please use the contact forms.
E) Add video instructional tutorials to the website. Many questions I receive could be avoided if I offered video training to show members how best to utilize the website. Of course, this still requires members to watch the videos, but if I do them properly they should go a long way to answer a lot of questions I receive especially from new members. I would like to have this done by the end of the year.
F) Personal help: I know many of you still want personal help and private one-on-one interaction. Later this year, depending on time constraints and how I'm actually doing on achieving my own trading goals, I will offer the opportunity with an additional fee for private sessions via online chat for those who desire them.
I think these 5 solutions will go a long way to helping me to eliminate the email time drain. I would appreciate your cooperation to utilize member support only when really needed and to send email to me only through the new contact form so that your email is filtered properly. I still encourage members to ask questions and I will do my best to offer answers through the weekly mailbag posts.
Second way to improve: Move my trading portfolio offline
Trading and investing in a fishbowl where others can review, constantly question, and critique every move I make has proven not helpful. In fact, I think it has stalled my progress, ultimately paralyzed my trading, and fostered an environment where I'm become afraid to make mistakes which is not conducive to good trading. Warren Buffett once said that the largest mistakes he has made are those which no one knows about because they are things that he decided not to do and opportunities he missed as a result. Well, in my experience the very same is true.
As I see it, the cons outweigh the pros for disclosing my trading portfolio any longer. Back in 2004, I decided to open up my portfolio so that others could benefit and learn from watching over my shoulder, but I don't believe that the manner that I've done this is beneficial to members or myself for the following reasons:
The potential for and rampant knowledge of copycat trading by members. The website is about opening doors, not pushing you through them
The invitation of market manipulation of stocks I trade because I trade them
The potential for unintended front-running of trades by me ahead of other members. Even the slight appearance of manipulation by me for profit is something I will avoid at all costs
The use of strategies (like daytrading) that are simply unsuitable and unrealistic for the vast majority of members
The complete paralyzing of my own short-term approaches due to their constant supervision and third party evaluation. Trading in a fishbowl is not an effective strategy and causes too much emphasis on "high win/loss ratios" versus overall profit.
According to the members survey, it simply wasn't a highly rated part of the website. I know some feel strongly about this feature, but the fact that only 60% beat the market last year who are members is evidence enough that it isn't helping to the degree it should.
I now have capital that require much different strategies and approaches than those who read the website. How you manage a million dollar portfolio versus a portfolio of $20,000 is different in many ways.
In spite of efforts to discourage copycat traders from signing up, the website attracts a lot of people who simply want to "ride my coattails" for $50 per year. I must refocus the website so that those who want to learn and improve, versus those seeking advice, will become members
Providing stock advice in this manner goes completely against my view that to do well in the market you have to work your own strategy versus trying to follow another person. Yes, I can provide the same tools I use (like my stock screen machine) and show how best to utilize it as well as offer perspectives and information that will help you become more successful, but sharing my trading portfolio turned out to be more of a hindrance than a real benefit. Ultimately, it causes sheep-like behavior among the membership, which will only delay your success
Solutions:
1) My trading portfolio will be removed from the website. I will no longer report trades I make or how I perform in the market. I will still submit my results to an outside third party as I have every year in case I should need to establish a track record for others to evaluate at a future time.
2) In order to still meet the demands of those who still wish to improve their trading, I will start a new feature at the website in 2008 called "trade flashback." When time permits and I have good situations to use as training examples to illustrate specific techniques, patterns, and strategies, I will discuss a trade I've made in the past and literally walk members through both sides of the trade including any lessons learned, etc. from start to finish. Members have been asking for me to do anatomy of specific trades in much more detail but I could not do that without also crossing the line into providing investment advice. It would have made my job of preventing copycat trading even more difficult than it already was. However, utilizing real examples in the past (both with successful and failed trades/investments) I think will prove far more instructive than simply asking members to reverse-engineer trades on their own and not specifically providing information that led up to the entry and exit of that trade. Again, focus on education versus advice so you can actually improve and achieve your goals. It will also help me to find flaws in my own trading.
By taking the portfolio offline, I fully expect two things to occur: 1) membership ranks will be lower and far fewer people will become members, and 2) those who seek to ride my coattails will move on to other websites and services. With the number of social investing websites now gaining in popularity, it won't be difficult to find alternative resources to use. But, I'm placing a large bet on what I think will be a majority of members who will stick with me and understand that what I'm doing is in all of our best interests. I have a number of very good members who are seriously working on improvement and that's who this website is for, not those looking for fast money, stock tips, or short-cuts. The latter will not find success in the market no matter what I do.
Third way to improve: Refocus the website
Although long-term members can and have noticed the progress, I have consciously made an effort to refocus the website on education and incorporating a lot of different ways to achieve financial goals. Even the sharing of my stock screen machine has an educational component as I show others how to incorporate screens within their own strategies. But, I can and should do more. Some of the things I would like to do include the following:
I need to spend more time showing how to utilize the stock screens and incorporate them in various different strategies, both short, medium, and long-term.
Even though they are not popular, I need to show how to incorporate passive investing strategies and why these are so very important even for short-term traders.
In the membership survey, 94% members wanted me to take a much closer look at stocks showing up in my screens. Soon I will start a "Stock Of The Week" feature where I will look at a stock showing up in my screens and how I go about evaluating, researching, and ultimately develop a plan of attack to buy and sell it in the future. I do this somewhat in the stocks only Q&A sessions, but I'd like to do more and I think the process I go through would be helpful.
Members want to interact with each other and, as long as it doesn't require constant supervision or time from me, I'm very much in favor of it. Although I'm not a fan of message boards, they can be useful to enable members to discuss and help each other if done properly. Later this year, I will try to integrate one (on a trial basis) and see how it goes. If it proves helpful, it will remain. If it is abused, it will go to the graveyard along with the "guess this stock" feature of 2007.
A lot of members really enjoy the outside expert Q&A's I do even though they require a huge time commitment by both me and the person I interview. For example, I have no doubt that between both me and Dick Davis, the recent Q&A probably took us well over 100 hours of our time. The end result was terrific, but it is quite overwhelming. Although I still plan to do these Q&A sessions, I think real-time moderate chats with me and other leading professionals would be nice. Not only would they be less time consuming, but would be more interactive for members.
Theme investing is very important and I think I could do a better job of covering themes than I have in the past, either though specific sector-based stock screens or simply writing theme based posts that open up the idea to invest in certain trends.
I enjoy offering (and also reading) opinions about software/books/brokers/tools and I would like to make time for doing some product reviews in the next year. In the survey members provided a lot of suggestions for products to review and that will help me figure out what to review. I don't think these reviews would take a lot of time, but would be helpful because I've used and tried just about everything out there.
An improved and more consistent batch of link posts. When 30% members say the link posts are too long, there's a problem. I understand now that a long link post can be intimidating because it represents a big time commitment and because it represents a flood of information to process. After all, you expect me to do the picking and choosing and the list will be more valuable if I do a better job of discarding the peripheral and included only the most interesting, original, timely and informative. As my mentor Dick Davis told me, "there may be a perception that you're throwing everything but the kitchen sink and leaving him with the time-consuming job of separating the wheat from the chaff." I must realize that less is more and I will strive for significant improvement in this area.
Members will soon have the option to subscribe to a daily email newsletter that will provide quick access to any updates made at the website and some special content that will make this a fast favorite among members. The goal here is make it easier for members to stay on top of everything I do at the website without being forced to visit the website constantly. After all, just like me, your focus should be on the market during trading hours.
I'm not happy with the timing indicator in its present form and comments received in the survey have helped me consider some ways to improve it.
Improvements and analysis of my stock screen machine will remain a high priority in 2008. In five years from now, if I dedicate the time and energy as I intend to, it will become one of the most powerful screening systems available. What you see now is only the first step of many to come.
By the end of 2008, I would like to introduce an entirely new website design that will be more user friendly and accessible. As you know, I made a substantial upgrade to the members' only website last Spring and the next upgrade will be even more important and pave the way to even more good things ahead. A substantial part of the budget will be dedicated to this upgrade.
Time For Transition
With all of these changes, I have committed the rest of January to making this transition. It will take a lot of time for me to restructure the website (both free and paid) before I can really put my plans to work and start the new routine. My programmer and I have also been laboring quite extensively over the past couple of months on the technology that runs the members' only website to allow for many of the solutions I've identified above (like enabling members to access and change information on the membership online and the ability to receive a daily newsletter if you want).
Along with all of this, I will also have to ramp up my trading and significantly modify my daily routine in order to break old habits and create a new daily routine that puts my priorities and goals in balance. None of this will be easy for me and the temptation to revert back to my old ways will be intense. Your patience will be appreciated as I go through this rough transition.
In Conclusion
After much time and consideration, I have to go with what I think is best for everyone and remain true to my objectives both in trading and at the website. I understand and expect that many will not like or accept these decisions. These were tough decisions to make without many easy answers. But, at the end of the day, I must do what I think is right and make the necessary sacrifices to achieve my goals. Nothing that is worth achieving in life comes from anything less than your very best.
Let's make 2008 our best year ever!
Posted by Kirk at 1:30 PM in News | Bookmark | Feeds | Link |
