In April of 2021, we set up an interesting experiment by investing $10K that we had sitting in cash. We put it into five $2K stocks / ETFs that we thought would be worthwhile investments over the next 12 months.
It was partly for fun, and partly to see if we could come up with investments that would outperform the overall stock market (using VTSAX as the benchmark). We also wanted to see if we could predict how well each investment would do by ranking them from 1 to 5.
Note: we had planned to provide an update every three months, but our 12,500-mile road trip took over for a couple months (at the 3-month mark, we were in the middle of Yellowstone National Park!). We’ll modify the plan by doing three 4-month updates, starting with this one.
So, how did we do? The short answer is not so great! None of our investments outperformed VTSAX (+8.77% during this timeframe), and only one of our ranking predictions came true.
Overall, I would give us a C+ grade both for our investments’ performance (+2.33% overall) and our predictions. Here’s an overview:
Let’s look at each investment (in order of best to worst performance) and see what happened...
1. Berkshire Hathaway (BRK.B)
April Price: $267.36
August Price: $286.60
% Change: +7.20%
Performance Grade: A-
Predicted Rank: 4
Actual Rank: 1
Prediction Grade: D
What we thought would happen: With Warren Buffett still at the helm as CEO, we predicted that BRK.B would probably do about as well as the overall market. We figured they would plod along in a smart methodical way with no huge home runs, but also no big losses.
What happened: It turns out we were right in that BRK.B tracked very closely to the overall market, but we didn’t anticipate that it would actually outperform all of our other picks.
Going forward: The latest investor news is that, based on put and call option activity, BRK.B appears to be positioned for the share price to fall. That said, we anticipate BRK.B will continue performing close to VTSAX. The question will be whether any of our other investments will improve enough to overtake it at the top.
Performance: Here is the 6-month chart for BRK.B:
2. Green ETF (QCLN)
April Price: $62.41
August Price: $66.51
% Change: +6.57%
Performance Grade: A-
Predicted Rank: 1
Actual Rank: 2
Prediction Grade: B
What we thought would happen: With the new Biden Administration making clean energy a big part of their agenda, we anticipated this green ETF to prosper and be the clear overall winner.
What happened: QCLN has performed pretty well but still lags slightly behind the overall market. Perhaps it had used up all its momentum. Before we bought, it had increased 463% from its low in March 2020 ($16) to its high in February 2021 ($90).
Going forward: At least one analyst is expecting it to hover in the $60-$70 range for the next few months. However, after the UN’s disastrous climate report came out earlier this month, we predict that this fund will start trending upward again in the coming months.
Performance: Here is the 6-month chart for QCLN:
3. Blockchain ETF (BLOK)
April Price: $49.66
August Price: $49.49
% Change: -0.34%
Performance Grade: C-
Predicted Rank: 3
Actual Rank: 3
Prediction Grade: A
What we thought would happen: We weren’t quite sure how to predict the BLOK ETF performance since there’s a lot of volatility, uncertainty, and continuous positive and negative news in the cryptocurrency space. We figured that it could really go either way, so we put it in the middle of the pack.
What happened: This fund has definitely been on a bit of a rollercoaster ride since we purchased it. It dipped down and bounced around in negative territory for most of the past four months, but recently improved to just below our original purchase price.
Going forward: We believe BLOK will continue to be up and down, but its overall trajectory will continue upward. It’s well-diversified in the blockchain space and its active managers seem to be doing a good job researching potential holdings.
Performance: Here is the 6-month chart for BLOK:
4. Tesla (TSLA)
April Price: $715.71
August Price: $711.92
% Change: -0.53%
Performance Grade: C-
Predicted Rank: 5
Actual Rank: 4
Prediction Grade: B
What we thought would happen: We predicted that Tesla would perform the worst of our investments, because it appeared to be a bit overpriced when we bought it. That said, our hope was that Elon Musk might surprise everyone with new technologies and advancements to stay ahead of the competition.
What happened: Like BLOK, Tesla has also been a bit of a bumpy ride since we purchased it. However, after taking a big dip at the end of May and beginning of June, it has been slowly but steadily increasing over the past couple of months.
Going forward: Musk has been working to position Tesla as more than just an electric vehicle maker. One of their new initiatives is getting into the energy space by applying to become an electricity provider in Texas. They’re also looking to “tackle the world’s hardest problems” with their AI technology. While some of this could be bluster, we expect Musk to continue taking big swings with Tesla, and perhaps some of them will turn into home runs.
Performance: Here is the 6-month chart for TSLA:
5. Norwegian Cruise Line (NCLH)
April Price: $26.36
August Price: $26.16
% Change: -0.76%
Performance Grade: C-
Predicted Rank: 2
Actual Rank: 5
Prediction Grade: D
What we thought would happen: We were hoping that the COVID-19 vaccinations would have sufficiently tamped down the pandemic by now, allowing people to begin traveling the world again. Our prediction was that NCLH, one of the largest cruise lines, would start to see revenues steadily increase as travelers ventured back out.
What happened: Things were looking quite promising in early June, and NCL’s stock was all the way up to $33.71 on June 8 (an increase of 28%!). But then the Delta variant took hold and put a major dent in the pandemic recovery, along with our ability to travel safely. To make matters worse, Florida made it impossible for NCL and the other cruise lines to require proof of vaccination for cruises out of Florida ports.
Going forward: As avid travelers and cruisers, we can’t wait to be able to start traveling again soon. Nobody knows exactly when that will be , but if vaccinations continue to ramp up, then medical experts such as Dr. Fauci believe we can likely get back to normal by Spring of 2022. Based on that timeframe, I anticipate we’ll start to see travelers begin booking their Spring and Summer cruises in the next several months.
Performance: Here is the 6-month chart for NCLH:
Takeaways
This thought-exercise has been very insightful. While our investments haven’t made much money, the experiment was always about the strategy and decision-making process, and not the overall return.
Our biggest takeaway so far is that it’s REALLY hard to beat the overall stock market. This is something we in the FIRE community preach on a regular basis, but you don’t realize how true it is until you try to do it with real investments.
It’s certainly possible that one or two of our investments will end up performing better than VTSAX by the end of the 12 months, but I also wouldn’t be surprised if none of them do. And that actually makes me feel better about our overall strategy of investing in very broad low-cost index funds.
We also considered whether to revise our initial predictions, but after reviewing them, we’ll stay with our first instincts. I believe NCL will move up the ladder once we get COVID under control, and I remain a bit skeptical of Tesla’s ability to expand into new tech markets.
In any case, it will be fun to see what happens! We’ll do our next update in December, and then a final evaluation in April 2022.
Meanwhile, we have some questions for you...
Which stocks / ETFs do you think will do best and worst for the remainder of the experiment? Do you agree with our predictions and assessments so far? And if you were to do a similar exercise, which investments would you choose?