orrection in my portfolio end of April, & more

Correction in my portfolio end of April, and other reflections

I’m embarrassed to say that there was a small error in my end of month summary. I had told you I was up 24.8% at the end of the month, which was incorrect.

I discovered the error after the close yesterday (Monday), when my daily spreadsheet showed my portfolio up 27.8%. I said, whoa, my Schwab summary shows I should have been up about 2%, not 3%. I checked Monday’s totals and they coincided with Schwab’s totals, so I looked back at Friday’s spreadsheet, and sure enough, I had been up 25.8%, not 24.8%, and I simply mis-transcribed it to my end of the month totals. That’s old age! That also changes my portfolio totals for the 16 months to up 131.7% (1.842 times 1.258 equals 2.317).

Why am I telling you this? Well, if I discovered that I had given you a value incorrectly high I’d correct it, so I am fixing an incorrectly low value.

And, as an aside, I’m brought back to the discussion I was having with streina the last couple of days about how an individual can’t beat the indexes because mutual fund managers presumably can’t. And I see that Bill Mann contributed a great article expanding my reasons why mutual funds can’t, and why it doesn’t apply to us.

I note that all the indexes dropped on Monday by about 1%, and are all now in negative territory for the year, while I, and presumably you, added about 2%. So we gained a remarkable 3% on the indexes in a day. And here I am beating the averages by about 132% over the last 16 months, and a lot of you are doing about the same plus or minus 10%. And we have someone writing:

Sure one can beat the average mutual fund manager with all the overheads of their trade… but indexing is king in the long run. Anything else is just sport/fun/hobby. It’s merely statistics that bear this out. Not anecdotes.

I just LOVE it! Statistics prove it! I wonder how he thinks the indexes are going to overcome a lead of 132%, and over how much time. Or a 500% lead from 2000 to 2010 (through the 2008 crash). But statistics prove it!

And we have someone else pointing out how, if we had just randomly selected the exact correct set of criteria at the beginning of the year we could have picked a portfolio of stocks that would have done as well as we’ve done. But of course he hadn’t done that at the beginning of the year. That was fine-tuning his selection looking backward, with his program picking how well each criteria had done over the four months, in order pick the exact correct criteria to use for how stocks had done for those four months. It’s easy to pick what was going to do well looking backward.

Oh well,

Saul

26 Likes

I’ve never understood why this is even an argument. Most actively managed funds are handily beaten by the market averages, and we all know many individual investors get beaten by market averages. Some of the losses are due to bad luck, but many are inarguably due to bad methods. So the pessimistic side knows that there are many methods to lose to the market averages, but the only way to beat the market averages is to wish on a shooting star? And the best - and only good - method is to buy the 500 most valuable companies (a backwards view, not looking forward at future growth) and just match the market averages… unless you’re feeling lucky.

So the amount of people getting lucky each year (by bringing the averages up to where they are) is equal to the amount of people who get unlucky plus the people with bad methods (which serves as the other side of the pendulum, everything things out). Doesn’t make sense to me.

1 Like

Saul, just a quick correction to this post of yours (40759). I absolutely never said ‘an individual can’t beat the indexes’. Such an unqualified statement on its own would be empty of meaning, as you annually prove.

We are entering a time when active management will have its best shot ever, for years, to beat the index. Double up on your hedge fund bet, Warren, and give them a fair crack at it!

And we have someone else pointing out how, if we had just randomly selected the exact correct set
of criteria at the beginning of the year we could have picked a portfolio of stocks that would have
done as well as we’ve done. But of course he hadn’t done that at the beginning of the year. That was
fine-tuning his selection looking backward, with his program picking how well each criteria had done
over the four months, in order pick the exact correct criteria to use for how stocks had done for
those four months. It’s easy to pick what was going to do well looking backward.

That’s nonsense.

As the “someone else” I can guarantee you the criteria were picked BEFORE the results were known.

If you want independent verification, go to this Web site and download the spreadsheet. Compute
the return of the index from 12/29/2017.

https://www.bvp.com/strategy/cloud-computing/index

For further verification, just do random trials of *all" tech small caps over the last four months.
Pick 10-stock portfolios at random from all these stocks. You’ll find that about 1/5th of them get
returns of 20% or better.

Ears

15 Likes

I’ve read through all your knowledge base files and the only section I see that relates to tracking your portfolio is in knowledge base 3. Could you point me to a good simplified spreadsheet to track my portfolio that has options to add new money and to open and close new positions? I wish I had read all this before I bought JD, I think it will turn around in the next couple of months but if it doesn’t I’ll follow your advice and sell so I can put the money to better use. Without having a good method to keep track of gains and losses I’m missing a huge piece of the learning puzzle.

3 Likes