Author Topic: Consistently beating the pants off of the S and P 500 index for 34 years  (Read 19571 times)

Bob W

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https://fundx.com/hulbert.aspx

This newsletter claims to have consistently, significantly beat the S and P,  while being tax efficient over 34 years. 

It is a "trend is your friend" method of reallocating among no load mutual funds each month.

Does anyone have any thoughts or has anyone used this newsletter service?


Discuss ---

Some points to consider -

1.  Tax efficiency for non sheltered accounts
2.  Time it would take to reallocate each month (30 minutes?)
3.  Ease of use
4.  Is a 34 year time period of beating the Vanguard 500 (39 years old) long enough?
5.  Since we are likely to see a short term (10 year) reversion to the mean and a decline in average annual returns,  is this a good strategy now?

For those of you who have drank the 500 index Kool-Aid does this one seem good to you or is it just too good to be true?   The reason I ask is that there was much discussion in a recent thread about how no one could consistently beat the S and P 500.  When it was pointed out that the majority of mutual funds actually do when the fees were stripped away this was disregarded.   

And lastly,  do you have a better method or newsletter for beating the S and P consistently?  I would love to hear it.   

I'm a "badass" DIYer so I'm not afraid to build my own portfolio and manage it with the idea to beat the S and P and Russell.
« Last Edit: January 05, 2015, 11:32:27 AM by Bob W »

kevinb421

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #1 on: January 05, 2015, 11:31:52 AM »
I used a similar newsletter service for a couple years.

I used Cabot, about 4 different of their newsletters. For full disclosure I made a shit ton of money, but I believe there were a lot of lucky guesses. This was all before I ever learned the beauty of indexing. The first year I subscribed to their generic newsletter and their much more expensive Options newsletter. The options letter made me an insane return, over 100%. I didn't renew it based on price and the next few months it gave most back.

I did find their traditional newsletter informative and interesting. It was almost worth keeping the subscription for the analytical discussion but it was too hard to read and not buy.


TL:DR : I used one for a long time, made money but I now know it was a lot of luck.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #2 on: January 05, 2015, 11:40:05 AM »
Too new in investing to add much ....

But I do find it fascinating that if they have been around that long, 'fundx' and 'hulbert' do not show up in any forum posts!
I can't wait to track this, and see what people think of this flavor Kool-Aid.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #4 on: January 05, 2015, 11:45:50 AM »
I just finished reading The Boglehead's Guide to Investing. It has a great section on financial newsletters. There was a 12 year study done and after those 12 years, 94% of the newsletters were out of business. There's no evidence that newsletters can time the market. Like mutual funds, winners rarely win again and losers often lose again.

I'll stick to my index funds.


Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #5 on: January 05, 2015, 11:46:00 AM »
I used a similar newsletter service for a couple years.

I used Cabot, about 4 different of their newsletters. For full disclosure I made a shit ton of money, but I believe there were a lot of lucky guesses. This was all before I ever learned the beauty of indexing. The first year I subscribed to their generic newsletter and their much more expensive Options newsletter. The options letter made me an insane return, over 100%. I didn't renew it based on price and the next few months it gave most back.

I did find their traditional newsletter informative and interesting. It was almost worth keeping the subscription for the analytical discussion but it was too hard to read and not buy.


TL:DR : I used one for a long time, made money but I now know it was a lot of luck.

I agree, you were probably lucky as most newsletters don't have a consistent track record of beating the crap out of the S and P.   This one does and it is very systematic while using no load funds instead of individual stocks.  It is not a stock picker thingy but rather a proven method thingy. 

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #6 on: January 05, 2015, 11:52:54 AM »
I just finished reading The Boglehead's Guide to Investing. It has a great section on financial newsletters. There was a 12 year study done and after those 12 years, 94% of the newsletters were out of business. There's no evidence that newsletters can time the market. Like mutual funds, winners rarely win again and losers often lose again.

I'll stick to my index funds.

Umm, we pretty much figured bogleheads wouldn't be open to this.  But you might do yourself a favor and look at this particular newsletter.   (regarding the 94%,  that would be about average for small businesses).   (for the record I'm not trying to convert bogleheads anymore that I would try to convert Harley riders to Hondas)


waltworks

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #7 on: January 05, 2015, 11:54:31 AM »
Just to nitpick - that study in the other thread did not account for survivor bias, and it *still* didn't show the majority of the funds beating the S&P. "Zero alpha" was I believe the term the authors used.

Newsletters are garbage sold to suckers. Period. If it sounds too good to be true...

-W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #8 on: January 05, 2015, 12:13:57 PM »
I'm not opposed to people smarter than  myself doing this stuff, but I'm just too damn gullible to put a significant portion of assets into any given method. I'd be willing to try it if I had a bigger portfolio, but for now just leaving it in various index funds seems like hedging my bets well enough.

I would be interested in eventually combining stuff like this with real estate and index fund investments too, though. For now I have very little in taxable accounts and so a tax-efficient strategy is of no concern.

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #9 on: January 05, 2015, 12:14:32 PM »
Just to nitpick - that study in the other thread did not account for survivor bias, and it *still* didn't show the majority of the funds beating the S&P. "Zero alpha" was I believe the term the authors used.

Newsletters are garbage sold to suckers. Period. If it sounds too good to be true...

-W

You are correct about newsletters sucking in general.  So are we to assume that this quote from the newsletter website is complete bullshit?

"And for more than three decades, NoLoad FundX has emerged as a top performer in the Hulbert Financial Digest. He points out that the NoLoad FundX growth portfolio has outperformed the S&P 500 since 1980, gaining 15.2% annualized compared to the 11% return of the S&P 500. And the past thirteen years are even more dramatic. During this time a gain of more than 5.6% annualized for NoLoad FundX greatly surpassed the 1.6% gain by the S&P 500."

I guess the worst part about this is the 1.6% annualized return of the S and P 500?  I wonder if that includes dividends?    Does that mean that my SWR should actually be zero?   

Since Hulbert is a nonbiased 3rd party rater of mutual funds I would assume he would call them out if he was misquoted? 

Just thinking outside of the S and P box here folks.  Nothing to be alarmed about. 


index

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #10 on: January 05, 2015, 12:19:30 PM »
Already shared this in another thread:

Here is another Vanguard ETF portfolio I actually use in one of our IRA accounts. I am not concerned with tax loss harvesting since it is not a taxable account.
This is an aggressive allocation with an 80/20 allocation to stocks and bonds, 70/30 split between US and Foreign companies, 43/32/25 Large/Mid/Small cap, and ~9% allocation to each sector (utilities and real estate included).  There are not transaction fees through Vanguard and the expense ratio is 0.13%. The PE ratio of the portfolio is 17.3, the expected EPS growth is 10.6%, and dividends of 2.2%. It returned ~8.2% this year.

The bond allocation is tilted to short term because I am worried about rising interest rates. 

US Equities:

28% VXF Vanguard Extended Market (Everything but the S&P 500)
8% VTI Vanguard Total Stock Market
5% VPU Vanguard Utilities
5% VOX Vanguard Communications
5% VAW Vanguard Raw Materials
3% VDE Vanguard Energy
3% VDC Consumer Staples

International Equities:

8% VEU Vanguard Ex-US Total Market
7% VSS Vanguard Ex-US Small Cap
6% VWO Vanguard Emerging Market
2% VNQI Vanguard International Real Estate

Bonds:

14% VCSH Vanguard Short Term Corporate Bond
3% BLV Vanguard Long Term Bond
3% VWOB Vanguard Emerging Market Bond

I back tested the portfolio (by asset class) from 1982 to 2014 comparing it to a 100% VTI portfolio, and a 3 fund portfolio (56% VTI, 24% International Equity, 20% Total Bond).
 
The results were:

Smart Index 11.64% CAGR 10K grows to 244k; Sharpe Ratio - 0.60
100% VTI 11.07% CAGR 10K grows to 210K; Sharpe Ratio 0.49
3 Fund Portfolio 10.69% CAGR - 10K grows to 190K;   Sharpe Ratio 0.54

There is a bit of upkeep with this portfolio to maintain the equal sector weighting. For instance, I had to bump VDE about 1% since the beginning of the year.

waltworks

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #11 on: January 05, 2015, 12:22:12 PM »
Yes, I would assume that it is complete bullshit.

-W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #12 on: January 05, 2015, 12:23:33 PM »
I agree, you were probably lucky as most newsletters don't have a consistent track record of beating the crap out of the S and P.   This one does

It's lost to the S&P 500 in six out of the last six years.

While that's certainly "consistent", it's definitely not the "consistent" you were led to believe!

Why would you have even started this thread before clicking on just one more link on their site to the "Performance" page? At least you could have started with an accurate premise.

https://fundx.com/performance.aspx

arebelspy

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #13 on: January 05, 2015, 12:24:41 PM »
Survivor bias.  It survived, meaning it did okay in the past.  That's not indicative of the future.
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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #14 on: January 05, 2015, 12:26:12 PM »
I agree, you were probably lucky as most newsletters don't have a consistent track record of beating the crap out of the S and P.   This one does

It's lost to the S&P 500 in six out of the last six years.

While that's certainly "consistent", it's definitely not the "consistent" you were led to believe!

Why would you have even started this thread before clicking on just one more link on their site to the "Performance" page? At least you could have started with an accurate premise.

https://fundx.com/performance.aspx

5 of the last 6.. The one it won was by 0.55% in 2009. 

It shows it "beating" it overall because of high early returns (every early retiree knows about sequence of returns), but in real life accumulation phase, it's better to have low early returns and higher later (when you have more money in) - so even that stat is misleading.  One earning and investing over that time period would have done better not being invested in this.

And it doesn't beat the Russell 2000 - why not invest in that if you're just chasing yield based on numbers?

« Last Edit: January 05, 2015, 12:28:14 PM by arebelspy »
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Sid Hoffman

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #15 on: January 05, 2015, 12:31:13 PM »
I just finished reading The Boglehead's Guide to Investing. It has a great section on financial newsletters. There was a 12 year study done and after those 12 years, 94% of the newsletters were out of business. There's no evidence that newsletters can time the market. Like mutual funds, winners rarely win again and losers often lose again.

I'll stick to my index funds.

Bingo.  If your stick in the mud is the S&P500, one thing you know for sure is that if you invest in an S&P500 index fund that you have a 100% chance of equaling the performance of the S&P500.  Not many other investment vehicles can promise you a 100% chance they will equal their benchmark.  Vanguard's VFIAX has just a 0.05% expense ratio, which makes it virtually free as long as you have the $10,000 minimum to get started.

skyrefuge

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #16 on: January 05, 2015, 01:19:45 PM »
5 of the last 6.. The one it won was by 0.55% in 2009.

Yeah, for the "Monthly Upgrader Portfolio". The "Class 3" portfolio loses six out of six. It wasn't really clear which portfolio was being cited; their explanatory text seemed to suggest "Class 3" was the one Hulberg was looking at, but of course it's confusing and unclear, and it almost even sounds like when their funds starts doing badly, they just reclassify it as something else (which might explain why their "most speculative funds" class has the lowest return, even after 34 years).

And it doesn't beat the Russell 2000 - why not invest in that if you're just chasing yield based on numbers?

Ha, yeah, good point.

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #17 on: January 05, 2015, 01:29:41 PM »
I agree, you were probably lucky as most newsletters don't have a consistent track record of beating the crap out of the S and P.   This one does

It's lost to the S&P 500 in six out of the last six years.

While that's certainly "consistent", it's definitely not the "consistent" you were led to believe!

Why would you have even started this thread before clicking on just one more link on their site to the "Performance" page? At least you could have started with an accurate premise.

https://fundx.com/performance.aspx

Of course you mean 5 out of the last 6 years the S and P beat the fundx portfolio?   3 of those were marginal.

The reason of course is that over the last 13 years the S and P had a cumulative return of just 80% vs. the fundx portfolio of 181%.  Annual returns of 8.27% avg for fundx vs.  4.62% for S and P.    Some of those years the fundx portfolio kicked ass on the S and P. 

I'm comfortable with statistical variance on and annual basis.   S and P indexers seek no variance and thus have an absolute guarantee to never do better than the S and P. 

You might also have noted (since you read the whole web site) that there is still a significant loss carry forward in the fundx portfolio.   


waltworks

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #18 on: January 05, 2015, 01:34:46 PM »
Just go buy it, then. What do you expect to hear from a bunch of statistics geeks and bogleheads?

I need to get into the snake oil business.

-W

skyrefuge

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #19 on: January 05, 2015, 01:48:30 PM »
I'm comfortable with statistical variance on and annual basis.
This newsletter claims to have consistently, significantly beat the S and P,  while being tax efficient over 34 years.

Ah, I see, you're simply unaware of what the word "consistent" means. Either that, or you're inconsistent about the type of performance you would like your newsletter portfolio to deliver.

Also, for the love of my bleeding eyes, give <SHIFT>-7 a shot someday; you might enjoy it!

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #20 on: January 05, 2015, 01:49:24 PM »
Already shared this in another thread:

Here is another Vanguard ETF portfolio I actually use in one of our IRA accounts. I am not concerned with tax loss harvesting since it is not a taxable account.
This is an aggressive allocation with an 80/20 allocation to stocks and bonds, 70/30 split between US and Foreign companies, 43/32/25 Large/Mid/Small cap, and ~9% allocation to each sector (utilities and real estate included).  There are not transaction fees through Vanguard and the expense ratio is 0.13%. The PE ratio of the portfolio is 17.3, the expected EPS growth is 10.6%, and dividends of 2.2%. It returned ~8.2% this year.

The bond allocation is tilted to short term because I am worried about rising interest rates. 

US Equities:

28% VXF Vanguard Extended Market (Everything but the S&P 500)
8% VTI Vanguard Total Stock Market
5% VPU Vanguard Utilities
5% VOX Vanguard Communications
5% VAW Vanguard Raw Materials
3% VDE Vanguard Energy
3% VDC Consumer Staples

International Equities:

8% VEU Vanguard Ex-US Total Market
7% VSS Vanguard Ex-US Small Cap
6% VWO Vanguard Emerging Market
2% VNQI Vanguard International Real Estate

Bonds:

14% VCSH Vanguard Short Term Corporate Bond
3% BLV Vanguard Long Term Bond
3% VWOB Vanguard Emerging Market Bond

I back tested the portfolio (by asset class) from 1982 to 2014 comparing it to a 100% VTI portfolio, and a 3 fund portfolio (56% VTI, 24% International Equity, 20% Total Bond).
 
The results were:

Smart Index 11.64% CAGR 10K grows to 244k; Sharpe Ratio - 0.60
100% VTI 11.07% CAGR 10K grows to 210K; Sharpe Ratio 0.49
3 Fund Portfolio 10.69% CAGR - 10K grows to 190K;   Sharpe Ratio 0.54

There is a bit of upkeep with this portfolio to maintain the equal sector weighting. For instance, I had to bump VDE about 1% since the beginning of the year.

Yes I saw that and good work  Index!   

I'm curious though why anyone would be invested in bonds at this particular time?   

Since your comfortable with adjusting, why not just adjust those bonds right out of your portfolio and wait a decade or so until bonds start paying decent rates again?   

Regarding the Russell 2000 concept.   Yes, this would be a preference to the S and P 500.   

Please remember everyone,  that I am not advocating for those comfortable with indexing to change course.   

I'm not advocating trading like mad men.   

What I am doing is seeking input on methods to significantly beat the indexes.   

If you have a method,  please share it. 

DrF

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #21 on: January 05, 2015, 02:00:12 PM »
Ummm, no discussion on the link I provided?

Buy equal weight all 500 of the Fortune 500 and sell any that have dropped off the list at the end of the year, buy new ones that have joined the list. TLH should pay for the trading fees. If you wait 366 days from purchase date then gains will be LTCG.

Should beat the sp500 if the trend continues.

arebelspy

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #22 on: January 05, 2015, 02:06:44 PM »
MOD NOTE:
Trolling is not acceptable.

This includes ignoring other poster's direct replies to you while reposting the same content, disregarding clear evidence that is posted, etc. in order to purposefully stir things up.

Disagreeing and having differing opinions is fine.  But when you do the above sort of things, it becomes very hard to indistinguish from trolling.  Just a friendly note before this thread goes further.  :)
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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #23 on: January 05, 2015, 02:10:03 PM »
Please remember everyone,  that I am not advocating for those comfortable with indexing to change course.   

I'm not advocating trading like mad men.   

What I am doing is seeking input on methods to significantly beat the indexes.   

If you have a method,  please share it.

Well it depends on what index you want to beat. If you want to beat the S&P 500, invest in the Total US Stock Market. If you want to beat the Total US Stock Market, then small-cap or extended market should outperform over the long term. But there are no guarantees and never will be.

So I highly doubt there is any way to consistently beat the market. You might find a way to beat it for a little while, but you'll eventually lose. Evidence always seems to point to buying and holding index funds for the long term.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #24 on: January 05, 2015, 02:13:44 PM »
So I highly doubt there is any way to consistently beat the market. You might find a way to beat it for a little while, but you'll eventually lose. Evidence always seems to point to buying and holding index funds for the long term.

Not true. Expert investors have and continue to beat it (see Warren Buffet.)

Any given "method" is more questionable. These experts do not beat it by relying on "one simple trick" or a fancy newsletter, they do it by being 3x smarter and more well-informed than anybody else in the business. If I could do it I would but I can't so I won't.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #25 on: January 05, 2015, 02:42:57 PM »
I think anyone claiming to beat the market every year is not being truthful.  I know this is a index-heavy board and there is nothing wrong with that.

There are a few generic issues with newsletters:
- They might have avoided sectors that previously called significant losses.  It looks like the one linked by the OP did very well in 2001 and 2008.  So, not tech heavy and finance heavy.  Other years were ordinary with typical slight underperformance.  This is obviously good but their recommendations will have their bloodbath eventually.  This is when you really find out if the techniques are good.  Someone who has avoided being tested by the market doesn't really know if he has a winning strategy.
- People who use newsletter information often have extremely variable results.  You are not forced to comply with the recommendations.  New subscribers will not get the same performance buying into "current" buys which already compiled significant gains for the "newsletter performance".  Some people get lucky and do better when they cherry pick or have good timing.
- Newsletter managers change just as fund managers change over time.  What you are buying today is not necessarily the same as what you were buying in 1999.

I had a couple of the TMF newsletters in 2004-2007 and I was happy for what I was learning.  My investment decisions were pretty variable but one winner really helped balance it.  Without the winner, I would have done badly.  I learned enough to find one other big winner.  It's something I can do but the time you need to invest is not really worth it unless you really enjoy it.  I treat it as a hobby but I always stay invested in a way that I can put it down and being out of the loop doesn't destroy my portfolio. 

Hidden Gems did really well when Tom was heading it.  Since other people have run it, performance has died.

None of the newsletters show a year-to-year performance analysis.  Only total return vs S&P since inception.

Signing up for a newsletter doesn't remove the time you need to spend to watch your portfolio.  People who do this, fail.  Do indexing if you don't want to make decisions.

index

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #26 on: January 05, 2015, 02:55:57 PM »

Yes I saw that and good work  Index!   

I'm curious though why anyone would be invested in bonds at this particular time?   

Since your comfortable with adjusting, why not just adjust those bonds right out of your portfolio and wait a decade or so until bonds start paying decent rates again?   

I chose to keep the bonds allocated at 20% for asset class diversity. You can have a negative long term view of bonds, but in the short term they anchor a portfolio allowing equity allocation to increase when the market falls and the portfolio is rebalanced.

The short term bond allocation at 14% is yielding about 1.9% - not great but not 0. The ST bonds are not as sensitive to interest rate increases.

I keep 3% in LT and EM bonds. These will get crushed if/when interest rates increase, but do great in the current environment of falling interest rates. The EM bonds are not as sensitive to US interest rates and are an anchor to the 6% allocation to EM equities.

If deflation occurs or prolonged low interest rates persist, the bonds will do just fine.

There are a lot of posters saying they are 100% equities, or help me diversify my 100% equity portfolio. To this I say a 20% bond allocation has traditionally been considered very aggressive. I'm not smart enough to predict if there will be inflation, deflation, or predict the interest rates two years from now. I've read quite a bit, and deflation is just as likely as inflation in my view. I'll just stick to the 20% bond allocation and tilt it toward the short term to take some risk off the table regardless of what happens in the credit markets. 


Regarding the Russell 2000 concept.   Yes, this would be a preference to the S and P 500.   

Please remember everyone,  that I am not advocating for those comfortable with indexing to change course.   

I'm not advocating trading like mad men.   

What I am doing is seeking input on methods to significantly beat the indexes.   

If you have a method,  please share it.

Small/MidCaps have traditionally out performed the S&P, but with greater volatility- read: risk.

S&P index funds - actually all Vanguard funds - have the shortcoming of market cap and liquidity weighting. Vanguard does this so they can create more shares not because it is the right way to weight a portfolio. This equal weighting that DrFunk has alluded too eliminates the cap weighting problem, but really only out performs the index because the equal weight index holds more mid caps. It still over invests in "hot" sectors of the stock market and has more volatility (risk) than the traditional S&P.

Equal weighting the sectors (the smart index I posted) eliminates the effects of these "hot" sectors and has shown over time to produce superior returns to the S&P, RSP (equal weight S&P), and VTI with less significantly less volatility. Essentially the increased risk you are taking on by holding a higher proportion of Small/Mid caps is negated by reducing the risk of over-weighted sectors in the S&P 500.

Like I said in the other thread. This portfolio out performed both a 3 fund portfolio and a 100% VTI portfolio over 32 years. It out performed both over ever 5 year time period from 1982 to 2014 except for the tech boom in 1994 through 1999. The portfolio then trounced the 3 fund lazy portfolio and VTI in 2000 when they came crashing back to earth with their obscenely high allocations to tech stocks resulting from their requirement to buy more and more .com companies on the way up.   



hamildub

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #27 on: January 05, 2015, 03:34:23 PM »
I think you may be missing one of the biggest points of using the index portfolio technique: Time Commitment.

If I have to pour over charts and be in the know on my picks and rebalance all the time, I don't have time to do other stuff. I used to be heavy into day trading and speculating, with the associated wildly fluctuating returns and moments of excitement (woo I made 5k over my coffee break, oh right I'm making up for losses....).

Indexing is from my research the least time consuming, most consistent risk adjusted strategy for investing in equity markets. Hey I like investing and am in fact a finance nerd, but honestly I just don't want that stuff to consume me. I can think about how to build cool stuff, or businesses/ideas I might want to create, or nerd out on music or whatever.

One other thing to consider - If this guy that puts out the newsletter really beats the market consistently, why does he need to put out a newsletter? (we know it's not out of the goodness of their heart)

innerscorecard

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #28 on: January 05, 2015, 07:45:00 PM »
It's possible to beat the market (I'm one of the biggest advocates of that on this forum), but it likely won't be through a newsletter.   If the newsletter picks were so good, why isn't he out there managing money with this strategy?

hodedofome

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #29 on: January 05, 2015, 08:42:45 PM »
There's nothing special about FundX. It's a cross asset momentum strategy ala Meb Faber or Gary Antonnacci. There's plenty of research and books out there if you want to look into it. Academic research as well for all the EMHers here.

As with any strategy, the key is for you to understand how it works and why it works, as well as backtest it at least 100 years so you know what to expect. How many years in a row did it underperform the market? Did the fact that it underperformed the past 5 prove that it sucks? Or has it done it before?

In Alex Geyserman's (sp?) new book he back tests a simple trend following strategy 800 years, does the fact that it might have had a stretch of a 20 year underperformance mean that it sucked, even though over the long haul it worked well?

You have to be ok with stretches like that, otherwise you'll give up on it at the worst possible time, most likely just before it turns back up and starts performing again (people do the same with index funds, it's human nature).

Between 2011 and 2013 many trend following hedge funds recorded their biggest and longest drawdown that they have ever had. The environment was horrible, every market in the world was correlated and trends didn't last for long. Some funds shut down and many pulled their money out...only to see 2014 be one of the best years on record, with most hitting new all time highs.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #30 on: January 05, 2015, 09:06:02 PM »
In Alex Geyserman's (sp?) new book he back tests a simple trend following strategy 800 years, does the fact that it might have had a stretch of a 20 year underperformance mean that it sucked, even though over the long haul it worked well?

You have to be ok with stretches like that, otherwise you'll give up on it at the worst possible time, most likely just before it turns back up and starts performing again (people do the same with index funds, it's human nature).

If it underperforms long enough to last the bulk of my investing lifetime, yeah, it's probably not a strategy I'm interested in, even if it would somewhat turn around a few years before I die.
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hodedofome

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #31 on: January 05, 2015, 09:22:03 PM »
Not many put all their money in a trend following fund. Most do it as part of their AA as it is uncorrelated with normal index investing. The holy grail is to find separate uncorrelated return streams and many use trend following as one of those. It's actually worked out just as you'd expect. They had their best year ever in '08, followed by 5 years of poor performance, and now this year big returns came back.

If something like that is part of your AA, then '08 would have been easier to stomach, and the bull market in stocks gives you decent returns while the trend following part is dragging along. The end result may be the same returns as stocks but with much less variance and volatility. It may not matter to the guy in the accumulation stage but it pays dividends to those needing regular income from their investments.

Note...I do not recommend anyone straying away from index investing unless they really know what they are doing.

FrugalSpendthrift

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #32 on: January 06, 2015, 09:01:35 AM »
I'm curious though why anyone would be invested in bonds at this particular time?   

Since your comfortable with adjusting, why not just adjust those bonds right out of your portfolio and wait a decade or so until bonds start paying decent rates again?
How do you know that bonds will do poorly for a decade?  Have you seen the chart comparing different asset classes?
http://awealthofcommonsense.com/updating-favorite-performance-chart/

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #33 on: January 07, 2015, 03:21:37 PM »

I had a couple of the TMF newsletters in 2004-2007 and I was happy for what I was learning.  My investment decisions were pretty variable but one winner really helped balance it.  Without the winner, I would have done badly.  I learned enough to find one other big winner.  It's something I can do but the time you need to invest is not really worth it unless you really enjoy it.  I treat it as a hobby but I always stay invested in a way that I can put it down and being out of the loop doesn't destroy my portfolio. 

Hidden Gems did really well when Tom was heading it.  Since other people have run it, performance has died.

None of the newsletters show a year-to-year performance analysis.  Only total return vs S&P since inception.

Signing up for a newsletter doesn't remove the time you need to spend to watch your portfolio.  People who do this, fail.  Do indexing if you don't want to make decisions.

You're correct in that most of the TMF newletters do not show year-to-year performance.  But, what they do typically show is the "average" return of each pick vs the S&P.  And for their flagship Stock Advisor service and Rule Breakers, their average pick has crushed the S&P since inception.  Both of these have been running for 10+ years.

Of course to get those returns, you'd have had to buy each of their 2 picks in each newsletter, each month for the past 10+ years. 

To be honest though, I've found their discussion boards to be far more valuable than their actual stock picks, which I rarely act upon. 

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #34 on: January 07, 2015, 05:52:42 PM »
No one mentioned the near 2% ER on these funds? ... Ew.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #35 on: January 08, 2015, 12:28:20 PM »
Not true. Expert investors have and continue to beat it (see Warren Buffet.)

This sounds like how those scratcher lotto addicts work.  They figure that somebody has to win and since it wasn't them before, that must mean it will be them next time.  After all, they can point to the list of people who've won big at scratchers as proof that people do win.

Did you know there's a national Rock, Paper, Scissors league?  Last time I read an article on their big tournament, it was basically an elimination tree.  The way elimination trees work is that two people go head to head and one emerges victorious.  It doesn't matter if you start with 10 people or 10,000, somebody will still be at the top of the tree.

It's a fact: somebody will win no matter how far the odds are against them.  I would not suggest anyone plan their retirement that way however, because ultimately more people will go home losers than will winners when you play games where the odds are against you.  It's a plain fact: if you engage in stock picking, the odds are against you.  Yes, some will beat various indexes or market returns over a given time period.  The truly lucky like Buffet manage to do it for a lifetime even.  That doesn't change the fact that the odds are against you if you're an individual stock picker.  You go from being an investor to a gambler, in a sense, because you know the odds are against you.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #36 on: January 08, 2015, 02:43:37 PM »

Not true. Expert investors have and continue to beat it (see Warren Buffet.)


Warren Buffet himself said something along the lines of, "Unless you wake up in the morning and see me staring back at you in the mirror, buy the indexes."  All of the money to his wife and heirs is already in Vanguard.  He has instructions to his trustees that all his money will go into index funds on his death.  He's possibly the most famous fan ever of passive investing.

skunkfunk

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #37 on: January 08, 2015, 03:59:43 PM »
Not true. Expert investors have and continue to beat it (see Warren Buffet.)

This sounds like how those scratcher lotto addicts work.  They figure that somebody has to win and since it wasn't them before, that must mean it will be them next time.  After all, they can point to the list of people who've won big at scratchers as proof that people do win.

Did you know there's a national Rock, Paper, Scissors league?  Last time I read an article on their big tournament, it was basically an elimination tree.  The way elimination trees work is that two people go head to head and one emerges victorious.  It doesn't matter if you start with 10 people or 10,000, somebody will still be at the top of the tree.

It's a fact: somebody will win no matter how far the odds are against them.  I would not suggest anyone plan their retirement that way however, because ultimately more people will go home losers than will winners when you play games where the odds are against you.  It's a plain fact: if you engage in stock picking, the odds are against you.  Yes, some will beat various indexes or market returns over a given time period.  The truly lucky like Buffet manage to do it for a lifetime even.  That doesn't change the fact that the odds are against you if you're an individual stock picker.  You go from being an investor to a gambler, in a sense, because you know the odds are against you.


Not true. Expert investors have and continue to beat it (see Warren Buffet.)


Warren Buffet himself said something along the lines of, "Unless you wake up in the morning and see me staring back at you in the mirror, buy the indexes."  All of the money to his wife and heirs is already in Vanguard.  He has instructions to his trustees that all his money will go into index funds on his death.  He's possibly the most famous fan ever of passive investing.

Did you guys read the rest of my post? I'm NOT advocating for stock picking. 80% of my money is in index funds, the rest is in REITs and bonds and whatever the hell else is in those Vanguard mutual funds.

Kaspian

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #38 on: January 09, 2015, 12:52:34 PM »
Did you guys read the rest of my post? I'm NOT advocating for stock picking. 80% of my money is in index funds, the rest is in REITs and bonds and whatever the hell else is in those Vanguard mutual funds.

I don't think anyone was criticizing your investment allocation strategy, it was the "Not true. Expert investors have and continue to beat it (see Warren Buffet.)" that raised an eyebrow.  80%+ of the "experts" continue to fail at it.

skunkfunk

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #39 on: January 09, 2015, 01:06:56 PM »
Did you guys read the rest of my post? I'm NOT advocating for stock picking. 80% of my money is in index funds, the rest is in REITs and bonds and whatever the hell else is in those Vanguard mutual funds.

I don't think anyone was criticizing your investment allocation strategy, it was the "Not true. Expert investors have and continue to beat it (see Warren Buffet.)" that raised an eyebrow.  80%+ of the "experts" continue to fail at it.

I suspect those 80% are largely not experts. I think hiring somebody to do it for you is a bad plan, too - anyone who is good enough at it to have made a fortune hardly needs their moves to create MORE waves by taking on clients money, right?

I'd try harder to justify this view, but again, not an expert, so whatever. Don't really know what I'm talking about.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #40 on: January 09, 2015, 01:50:02 PM »
Speaking of Warren - I am not sure why he keeps being referenced. He is not an investor (passive investor) in any definition I have seen this board use. Unless you and me two take passive stake in a business through stock ownership , Warrens gets insider position, sit on the board, ability to change company direction (i.e. regarding dividend or repurchases of stock) and access to nearly free capital.  He is much more akin to leveraged buyout funded corporate raider who takes direct control (or strongly influences) targeted organization. He also gets sweetheart deals (i.e. last crisis) from both the government and the companies and heavy political insider.  His record is not and should not be compared to passive investor record.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #41 on: January 09, 2015, 02:02:27 PM »
^^^ Good points about how Buffet isn't really an investor, as well as the sweetheart deals.  This article details a lot of the BRK sweetheart deals many of which were cash infusions that gave him preferred stock that paid crazy dividends, like 6 to 10 percent.  NOBODY gets to buy stock in huge companies that pay out 6-10% dividends, but Buffet's Berkshire Hathaway did because they get to make their own rules when they have billions to throw around like that.

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #42 on: January 09, 2015, 02:14:38 PM »
Thanks for all your input.

I'm the OP.  My original question was   "do you have a better method or newsletter for beating the S and P consistently?  I would love to hear it."

Still listening but what I'm hearing from most of you is "no."


waltworks

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #43 on: January 09, 2015, 02:22:30 PM »
What did you expect? Of course people here will say no. The mere words "stock newsletter" give me a nasty twitch...

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #44 on: January 09, 2015, 02:23:23 PM »
My thoughts are as follows:

I would be concerned that the only place to find the claim that this newsletter beats the S&P500 is on the newsletter's own webpage. Also, it is not totally clear if it's actually saying that the newsletter has beaten the S&P consistently since the 1980s, or if its current portfolio recommendations would have beaten the S&P (using historical backtesting).

The Fundx webpage makes many claims about what Hulbert Financial Digest says about it... but I was completely unable to confirm that Hulbert Financial Digest said these things. The only place on the internet that these claims are made are on Fundx's own website.

It's totally possible that this newsletter is amazing. It's probably at least more amazing than I am. After all, I can say with a certainty, that -I- do not have a method for beating the S&P consistently. Although I do have a method for not underperforming it. ;)

MrMoogle

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #45 on: January 09, 2015, 03:21:57 PM »
Thanks for all your input.

I'm the OP.  My original question was   "do you have a better method or newsletter for beating the S and P consistently?  I would love to hear it."

Still listening but what I'm hearing from most of you is "no."

Yes, there are better strategies than putting all your equity money in the S&P500.  The S&P500 is mostly growth stocks.  Value stocks are historically slightly better than growth.  Large cap value should be better long term. 

Diversification and rebalancing help too.  It smooths out the variances and can actually increase your gains, although rebalancing schemes can get complicated.  REIT's, small cap funds, international funds, dividend funds, bonds, all help, anything that doesn't necessarily follow everything else, or follow as much. 

Yes the S&P500 is the benchmark, and it's good to have money in that index, but I wouldn't have it all there.  You don't have to make it too complicated, I think MMM has like 4 index.  I have like 8, and if anything I'll cut back from that.

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #46 on: January 10, 2015, 09:11:43 AM »
Thanks mrmoggle.

Jags4186

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #47 on: January 10, 2015, 12:16:51 PM »

Speaking of Warren - I am not sure why he keeps being referenced. He is not an investor (passive investor) in any definition I have seen this board use. Unless you and me two take passive stake in a business through stock ownership , Warrens gets insider position, sit on the board, ability to change company direction (i.e. regarding dividend or repurchases of stock) and access to nearly free capital.  He is much more akin to leveraged buyout funded corporate raider who takes direct control (or strongly influences) targeted organization. He also gets sweetheart deals (i.e. last crisis) from both the government and the companies and heavy political insider.  His record is not and should not be compared to passive investor record.

I don't know why Warren Buffett is referenced--not for these reasons--but simply because it's like saying "well Michael Jordan could score on anyone...I can too".  Or "Alexander the Great conquered the world, I can too!"  I mean really?  People convince themselves they can beat the market over the long term because Warren Buffet did it but apparently doing so is such a rare event the entire world knows the name of the guy who did it! 

Bob W

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #48 on: January 11, 2015, 10:26:38 AM »

Speaking of Warren - I am not sure why he keeps being referenced. He is not an investor (passive investor) in any definition I have seen this board use. Unless you and me two take passive stake in a business through stock ownership , Warrens gets insider position, sit on the board, ability to change company direction (i.e. regarding dividend or repurchases of stock) and access to nearly free capital.  He is much more akin to leveraged buyout funded corporate raider who takes direct control (or strongly influences) targeted organization. He also gets sweetheart deals (i.e. last crisis) from both the government and the companies and heavy political insider.  His record is not and should not be compared to passive investor record.


I don't know why Warren Buffett is referenced--not for these reasons--but simply because it's like saying "well Michael Jordan could score on anyone...I can too".  Or "Alexander the Great conquered the world, I can too!"  I mean really?  People convince themselves they can beat the market over the long term because Warren Buffet did it but apparently doing so is such a rare event the entire world knows the name of the guy who did it!
.   Probably because he is a value investor who says things like buy good companies cheep and hold them forever.  His bio is interesting.

skunkfunk

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Re: Consistently beating the pants off of the S and P 500 index for 34 years
« Reply #49 on: January 12, 2015, 10:49:59 AM »

Speaking of Warren - I am not sure why he keeps being referenced. He is not an investor (passive investor) in any definition I have seen this board use. Unless you and me two take passive stake in a business through stock ownership , Warrens gets insider position, sit on the board, ability to change company direction (i.e. regarding dividend or repurchases of stock) and access to nearly free capital.  He is much more akin to leveraged buyout funded corporate raider who takes direct control (or strongly influences) targeted organization. He also gets sweetheart deals (i.e. last crisis) from both the government and the companies and heavy political insider.  His record is not and should not be compared to passive investor record.

I don't know why Warren Buffett is referenced--not for these reasons--but simply because it's like saying "well Michael Jordan could score on anyone...I can too".  Or "Alexander the Great conquered the world, I can too!"  I mean really?  People convince themselves they can beat the market over the long term because Warren Buffet did it but apparently doing so is such a rare event the entire world knows the name of the guy who did it!

I believe my point (I brought him up initially) was more like, "Michael Jordan can play better than you. Don't play his game, you can't win. Stay away."

Thanks for all your input.

I'm the OP.  My original question was   "do you have a better method or newsletter for beating the S and P consistently?  I would love to hear it."

Still listening but what I'm hearing from most of you is "no."

There are other, um, non-stock methods for consistently beating it! You could use the seed money for an ebay store, or to do some other side gig, or open your own business... In my case I have made many better investments (engineering degree, a trombone, cordless drill, shovel, etc.)

But really, to answer more in the spirit of your question, nope, you're right, I don't.