Welcome to the Third Annual Mea Culpa Festival, a regular visit with the hapless things I have done with some of my own money. Just remember that the operative word here is "some." At its peak, the money at stake was no more than a decked out BMW 7 series. Now, after three grim years, we'd have to settle for something less than a Lexus 430 LS.   After several years of having a slight lead over the Vanguard 500 Index fund, we're now slightly behind.

There is other money, stashed in other accounts, and broadly invested. The Burns family will not starve.

The original idea was to try to build a portfolio of individual stocks that could be held for Warren Buffett's favorite holding period, forever, thus achieving maximum tax efficiency. Well, that's a lot easier said than done.   Both of the remaining long-term individual stocks in the portfolio have been "torpedo stocks" in the last two years--- the kind of stocks that sink portfolio performance.

Bristol Myers Squibb (BMY) is down 53 percent for the year as this is written, and Charles Schwab (SCH), is down 25 percent. That compares with a Vanguard 500 Index fund figure of 21 percent.   As I said, torpedo stocks.

Why weren't they sold? Sheer dull-witted tax phobia. Rather than face a maximum capital gains tax of 20 percent, I held out, violating a prime rule for the second time in two years. Don't let capital gains taxes prevent you from selling.

Is there any redemption here?

Not really. Bristol Myers Squibb is now so depressed it's a dividend stock yielding 4.6 percent. It's also a potential takeover play. It would be a major beneficiary of any move to eliminate the taxation of corporate dividends. The other big future it may have is in schizophrenia--- the company has a new drug that will challenge Zyprexa.

Schwab remains a fine company-- but burdened with an even finer P/E multiple.

Like most investors, I suspect that the biggest feel-goods come from looking at a list of stocks sold, not stocks purchased. I could gloat, for instance, about having sold half my Schwab shares in 1999 and half of the remainder in early 2001. I could feel even better about having sold Ciena (CIEN) in April of 2000 at about $90 a share. It's now selling under $6 a share.

Even WorldCom, bought at an average of $26 in 2000 as a conservative play on the growth of the Internet (Ho-Ho-Ho!), looks like a brilliant move today. Why? Because I sold it for $13 in the waning days of 2000, losing only half my money rather than all of it. Who would have guessed WorldCom would disappear? Not Jack Grubman or Smith Barney Solomon.

Another unexpectedly good move also involved a sale. In early 1997 I felt badly about taking money out of the stock market (and this account) to make a down payment on a house in Santa Fe. I worried that the new "investment" wouldn't do as well as the stock market.

Wrong again. The value of Santa Fe residential property has soared--- but isn't counted in computing returns.  

What about the plunge into Southwest Air (SWA) and Texas Instruments (TXN) that I took as an emotional leap when the market opened after 9/11? Well, they were sold in June, one for a small gain, one for a small loss. They were sold on the same day that I sold my remaining shares of Brinker (EAT) for a nice gain.

The reason for all three sales was the same: to raise cash and get out of the way of a volatile, falling market. Today, all three are lower. There, I was following a rule rather than ignoring it: Don't invest in individual stocks if volatility makes you lose sleep.   At 62, my sleep is easily disturbed.

Where are we now? About 40 percent cash, 60 percent equities. The equity money is divided between those 'legacy' shares of Bristol Myers and Schwab plus shares of the Russell 2000 Value Index iShares (IWN) and Russell 1000 Value Index iShares (IWD) purchased last year to reduce volatility.

In other words, I've been lurching toward value-oriented index investments.

What's my next move? Realize the remaining gains and put every dime of equity money in the Vanguard Total Market Index fund (VTSMX) because it's low cost, very diversified, and has a capital loss that will cover future gains for some time.

It's called Couch Potato investing.