Chris Lau - Seeking Alpha

Monday, August 08, 2011

Portfolio Management: Dealing with the Market Sell-off

In the coming days and weeks, there will be a plethora of posts from mainstream media "advising" investors on what to do.

Truth be told, only the most prepared investors coming into this market drop over the past few days will be those who anticipated it. Those who held on to cash and gold will not see significant paper losses.

On, I run and share two virtual/practice portfolios.

What is the value of a practice portfolio? An investor can use kapitall's interface to plan investments before putting them in real portfolios.

The 100K portfolio:
Down 3.1% today vs. the 5.55% drop on the DJIA and 6.66% drop on the S&P.
Total return is 21.8% vs. ~5% return from the S&P 500.

The 10K Portfolio:

The 10K portfolio suffered devastating losses at the start of 2011, due to various Chinese RTO fraud investments. Thankfully, this lesson was learnt in the practice environment.

David Neubert, co-founder of was on Fox discussing today's investment environment:

In summary, the S&P downgrade is mostly a non-event. Recall that S&P failed to downgrade MBS securities when they were clearly not worth AAA. This is not to say that the market shift in sentiment is temporary. 

It is to say that there are more serious risks to watch closely than what S&P says: the debt problem in Europe, the inflation problem in China, and the effect of U.S. debt yields dropping (with the world still treating the US as being the world's reserve currency).