Your portfolio's risen in value. But that doesn't mean you are a good investor.
Have you made lots of money from your portfolio this year? Have you watched in admiration as some of your stock picks doubled, tripled, quadrupled or even octupled?
Of course you have.
Does your strategy of, say, combining big divi blue chips and small whizzy AIM growth stocks look like a winner?
I would say that most likely it has.
Feeling pretty clever as a result?
Well you shouldn't.
Because it's not you. It's the markets, stupid.
Don't be fooled!
Yes, your portfolio is up 40% since March, and every new stock pick has turned to gold. That's cause for celebration, naturally, but don't get carried away.
Sorry to break the bad news, but you haven't suddenly become an investment genius, and your portfolio isn't an expertly-crafted artefact combining beauty and balance in equal measure.
The truth is that you have mostly benefited from the general uplift, something you neither predicted nor really prepared for (admit it!). You're making money, because almost everybody is making money.
It isn't you.
Quiet. Genius at work
And it isn't me either.
I almost succumbed to a severe attack of the smarts recently. Every time I picked up an underrated AIM stock, such as Volvere (LSE: VLE), it shot up 35% in a matter of weeks, or sometimes days.
I'm brilliant, me.
Only a few weeks ago, I decided to widen my exposure to solid, healthy dividend paying blue-chips. So I bought Vodafone (LSE: VOD) on 6 August, and I'm already up 7%, plus I've got that 5.8% yield to look forward to. Sheer investment genius.
I topped up my BP (LSE: BP) holding on 20 August, and within a couple of weeks it pumped out the news of a giant oil discovery. Talk about the Midas touch. My eastern European, Latin American and China investment trusts are all flying.
I can't go wrong.
Oh yes I can.
Fun in the sun
It has been a lovely six months to be an investor. We have recouped the dramatic losses from last autumn's crash, and can still convince ourselves there is plenty of upside to come.
Despite all the fun, the FTSE sits at just under 5,000. This suggests we could enjoy another 35% of fun and games before it nears its July 2007 high of 6,732.
That sounds promising, but it doesn't make us investment geniuses, no more than last year's crash meant we were buffoons.
As the phrase "dash for trash" suggests, people have been able to make big money this year from buying any old garbage. In fact, the trashier the better.
Just as last year we were all losing big money, regardless of the quality of the companies we had invested in.
It wasn't just you, it was everybody.
So what does this mean?
There is no question that rising stock markets cover a multitude of sins. Second-rate fund managers know this. They take the credit when their fund values are rising, and blame market conditions when they don't.
Of course they do, they've got their jobs and bonuses on the line. But that doesn't mean that we should fool ourselves.
Unless we're very clever, or know how to short or spread bet, we're always going to look like clever clogs in the good times and dunces in the bad.
It is very hard to defy the market, either on the way up along the way down. That's why The Motley Fool is perfectly happy to suggest you stick money into low-cost index trackers, and leave it there while markets work their long-term magic.
You can do better!
But I'm not doing that. Not because I think I'm a genius, but because I have learned that with careful research, good judgement, and a bit of luck, you can filter out the shares that are likely to do a bit better in today's market conditions, and earn an extra margin on them.
Some shares will always outperform, and it is up to you to find them. The Fool's expert stock picker, Maynard Paton, can help you out too.
As you can see, I haven't defied the market, which has also risen, but I have outpaced it, which is all you can ask for.
If you're so clever why ain't you rich?
Making money in the next few months probably won't be as easy as it has been lately. Bears are roaming the streets, it is September, October comes next, so don't be misled by your recent presentiments of genius. Keep your head, stick to your strategy and principles, and you should be able to make more money in the months to come.
That still won't make you a genius, but it might make you a little wiser, and a tiny bit richer.
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