My results for the year 2015.
Here’s a little quote from Wall Street Breakfast dated Dec 30.
The Year Stocks Went Nowhere
The U.S. stock market took investors for a wild ride in 2015, but in the end it was a trip to nowhere. Equities began the year with a slow start as investors worried about falling crude prices, flat earnings growth and when the Fed would begin raising rates. By May, stocks were hitting new highs, but the market didn’t stay there for long. Worries about slowing Chinese growth in the summer gave reason for the Fed to pause and for traders to fret, sending U.S. indexes into a correction, although the last few months they’ve marked a return to their initial starting point. Better luck in 2016?
For the year I ended up 16.0%. I certainly considered this an okay year. It would be silly not to be happy with a gain of 16%, but it was not really a satisfactory year, as I really aim to do better than 25%. I had a bit of a headwind though as the overall market pretty much flatlined, and the S&P was down 0.7% for the year. (see article above).
Please don’t work it out that that means I did 23 times better than the index or something like that, because the index was up down 0.7% and I was up and I was up 23 times as much, or any such total nonsense. Think of it like this: If the index was up one one-hundreth of a percent, and and I was up one percent, would you say I did 100 times better because I was up 100 times more than the index was up? Of course not. If you had invested $100 in each, at the end of the year I would have had $101, and the person invested in the index would still have had $100 (plus a penny), so I would have ended the year about 1% ahead, not 100 times better.
In this case, I ended up with $116.0 and the index ended up with $99.3. Now 116 divided by 99.3 equals 1.168, which means I came out 16.8% ahead of the S&P (that’s 17 percent better, not 17 times better). Of course if I could keep coming in 17% better year after year that would compound and add up to a lot.
Please also note that I don’t ordinarily measure against the S&P, or any other index, but since I started this board I post my results against the S&P since the MF uses it as their yardstick. There’s a reason that I don’t measure against indexes. My goal is to make money each year that my family and I will live off. That’s what counts for me. Measuring against the S&P is setting the bar very low, as it’s a mix of 500 large-cap stocks, made up of good stocks, mediocre (average) stocks, and poor stocks. Averaging good, poor and mediocre stocks, you’d expect a mediocre result as compared to selecting 10 or 20 good stocks. I mean, you really should be able to SELECT a small basket of good stocks that will do better than this mixture of five hundred mixed stocks.
Since most of my stocks are what would be called small-cap or mid-cap stocks, and small-caps usually do better than large-caps over time, I thought perhaps it was unfair to compare my results against the S&P, and maybe I should compare against a small-cap index instead. The Russell 2000 is the best small-cap index. Wikipedia says, The Russell 2000 is by far the most common benchmark for mutual funds that identify themselves as “small-cap”…It is the most widely quoted measure of the overall performance of the small-cap to mid-cap company shares.
Well, it turns out that the Russell 2000 Small Cap Index was down 5.7% in 2015, so I ended up with 116.0 and the index ended up with 94.3. Now 116 divided by 94.3 equals 1.230, which means I did 23.0% better than the Russell.
This was kind of a strange year. A number of my stocks had large drops in value during a general market correction, although the companies the stocks represented continued to do very, very, well. I guess I should be pleased to still be up 16% and be well ahead of the indexes. I hope to do better next year.
Saul
