NW-Bound
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Jul 3, 2008
- Messages
- 35,712
I am not an indexer. I have been shifting more and more money from MFs into individual stocks, or sector ETFs.
I believe in[-] market-timing[/-] buy-low-sell-high, therefore I never want to hold just one asset. The problem is the act of rebalancing by itself is tricky. It can really affect one's performance.
And more than that, I try to do sector rotations, selling out of hot ones to go into cold ones. Oh yes, one can make a lot of money in theory, but with zillions of people out there doing it, am I smarter than they are?
People who are actively self-managing their portfolio should compare themselves to some benchmarks, or indices, or well-known mutual funds to see if they would be better off handing their money over to a professional money manager, or just to follow some indices.
I am no different. As often posted here, I have been pondering if I should just put all of my money in a good MF such as Wellesley, and just head into the woods in my RV (if my wife would follow me, as I would be lonely otherwise), only emerging every so often to see how much money the MF manager has made for me.
So, what is my performance compared to Wellesley? The following table compares Wellesley (VWINX) against NWBGX (hedge fund managed by NW-Bound). I tried to use VWIAX, which would give a better return due to lower fees, but Morningstar did not show historical data prior to 2002 for the Admiral fund.
Caveat: I kept a diary showing my portfolio total worth to the last dollar. It is recorded daily, unless I was without Internet connection due to traveling or boondocking. However, I do not keep meticulous records of money flowing in/out of that portfolio. My income in the last 10 years has been really sporadic, because I did not have full-time income the last decade.
There were years where my income was so little I had to move money around to fund our IRAs. I know that my wife's income, when she was still working, was not sufficient to support our expenses. Still, I had some good years where we had plenty of money left over. There was even one year where I triggered AMT. But then, we bought a second home, and in recent years had to support two children through college on my part-time income.
In short, for the sake of simplicity, I just assumed that the money flow into my portfolio was neutral overall. That assumption could be all wrong (I suspect there was net flow into the portfolio, not out), but to reconstruct all transactions would take a bit of work.
Ladies and gentlemen, the following table shows what you would have at the beginning of each year since 2000, if you put $10K into VWINX, vs. NWBGX. Again, the manager of NWBGX was "borrowing" from the fund from time to time, and "repaid" as he was able to. His accounting was sloppy, but he was definitely not Madoff, as there are indeed records showing NAV of NWBGX as spread out among two dozen accounts at Schwab, Scottrade, Fidelity, US Treasury, etc... In fact, as stated, the manager of NWBGX might also have been a benevolent one, meaning he migh have deposited more than he withdrew.
Jan 1 VWINX NWBGX
2000 10000 10000
2001 11617 9885
2002 12456 9464
2003 13015 7811
2004 14308 10644
2005 15356 11929
2006 15965 13634
2007 17733 14930
2008 18735 17155
2009 16645 13011
2010 19656 16192
2011 21625 18524
2012 23772 17612
So, what do you think? In a nutshell, NWBGX's manager performance really stank in the 2000-2003 time frame. He was hanging on to his tech stocks way too long after the 2000 bust. He redeemed himself for the period of 2003 till now, gaining 125% vs. 83% for VWINX. But again, it could have been due to his depositing his own money into the fund to make up for his past sin. But he bought his 2nd home in 2005 too!
Due to accounting irregularities, the above performance of NWBGX would not be approved by the SEC, and must be taken with your tongue planted firmly in your cheek. The above table shows that your $10K in Jan 1, 2000 would have shrunk to $7811 on Jan 1, 2003 due to tech stock imploding, plus the manager's borrowing for living expenses. The truth is that it was not even the lowest point, which was reached on March 03, 2003 when the manager borrowed a bit of money to pay off his mortgage on his 1st home. You would have 70 cents on the dollar at that point!
As to investment style, VWINX hold 40% stock, mostly conservative dividend stocks. NWBGX equity ratio is higher and not fixed, but varies from a high of 80% to briefly as low as 40%, and has a large percentage of high-beta stocks. VWINX has an annual portfolio turnover of 48%, while NWBGX's is a lot lower and also very sporadic, meaning it can be as low as 5%, and as high as 60%.
So, would you trust your money with NWBGX (never open to outside investors), or VWINX? While no MF performance is ever guaranteed, you would be sure that the ride is never boring with NWBGX. You may have sleepless nights, and would be advised to wear your Depend to bed. The manager himself however is used to it and only has bad dreams occasionally.
I believe in[-] market-timing[/-] buy-low-sell-high, therefore I never want to hold just one asset. The problem is the act of rebalancing by itself is tricky. It can really affect one's performance.
And more than that, I try to do sector rotations, selling out of hot ones to go into cold ones. Oh yes, one can make a lot of money in theory, but with zillions of people out there doing it, am I smarter than they are?
People who are actively self-managing their portfolio should compare themselves to some benchmarks, or indices, or well-known mutual funds to see if they would be better off handing their money over to a professional money manager, or just to follow some indices.
I am no different. As often posted here, I have been pondering if I should just put all of my money in a good MF such as Wellesley, and just head into the woods in my RV (if my wife would follow me, as I would be lonely otherwise), only emerging every so often to see how much money the MF manager has made for me.
So, what is my performance compared to Wellesley? The following table compares Wellesley (VWINX) against NWBGX (hedge fund managed by NW-Bound). I tried to use VWIAX, which would give a better return due to lower fees, but Morningstar did not show historical data prior to 2002 for the Admiral fund.
Caveat: I kept a diary showing my portfolio total worth to the last dollar. It is recorded daily, unless I was without Internet connection due to traveling or boondocking. However, I do not keep meticulous records of money flowing in/out of that portfolio. My income in the last 10 years has been really sporadic, because I did not have full-time income the last decade.
There were years where my income was so little I had to move money around to fund our IRAs. I know that my wife's income, when she was still working, was not sufficient to support our expenses. Still, I had some good years where we had plenty of money left over. There was even one year where I triggered AMT. But then, we bought a second home, and in recent years had to support two children through college on my part-time income.
In short, for the sake of simplicity, I just assumed that the money flow into my portfolio was neutral overall. That assumption could be all wrong (I suspect there was net flow into the portfolio, not out), but to reconstruct all transactions would take a bit of work.
Ladies and gentlemen, the following table shows what you would have at the beginning of each year since 2000, if you put $10K into VWINX, vs. NWBGX. Again, the manager of NWBGX was "borrowing" from the fund from time to time, and "repaid" as he was able to. His accounting was sloppy, but he was definitely not Madoff, as there are indeed records showing NAV of NWBGX as spread out among two dozen accounts at Schwab, Scottrade, Fidelity, US Treasury, etc... In fact, as stated, the manager of NWBGX might also have been a benevolent one, meaning he migh have deposited more than he withdrew.
Jan 1 VWINX NWBGX
2000 10000 10000
2001 11617 9885
2002 12456 9464
2003 13015 7811
2004 14308 10644
2005 15356 11929
2006 15965 13634
2007 17733 14930
2008 18735 17155
2009 16645 13011
2010 19656 16192
2011 21625 18524
2012 23772 17612
So, what do you think? In a nutshell, NWBGX's manager performance really stank in the 2000-2003 time frame. He was hanging on to his tech stocks way too long after the 2000 bust. He redeemed himself for the period of 2003 till now, gaining 125% vs. 83% for VWINX. But again, it could have been due to his depositing his own money into the fund to make up for his past sin. But he bought his 2nd home in 2005 too!
Due to accounting irregularities, the above performance of NWBGX would not be approved by the SEC, and must be taken with your tongue planted firmly in your cheek. The above table shows that your $10K in Jan 1, 2000 would have shrunk to $7811 on Jan 1, 2003 due to tech stock imploding, plus the manager's borrowing for living expenses. The truth is that it was not even the lowest point, which was reached on March 03, 2003 when the manager borrowed a bit of money to pay off his mortgage on his 1st home. You would have 70 cents on the dollar at that point!
As to investment style, VWINX hold 40% stock, mostly conservative dividend stocks. NWBGX equity ratio is higher and not fixed, but varies from a high of 80% to briefly as low as 40%, and has a large percentage of high-beta stocks. VWINX has an annual portfolio turnover of 48%, while NWBGX's is a lot lower and also very sporadic, meaning it can be as low as 5%, and as high as 60%.
So, would you trust your money with NWBGX (never open to outside investors), or VWINX? While no MF performance is ever guaranteed, you would be sure that the ride is never boring with NWBGX. You may have sleepless nights, and would be advised to wear your Depend to bed. The manager himself however is used to it and only has bad dreams occasionally.
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. Maybe buying a target fund like Unclemick and just forget it. Or going 20% cd's and splitting the balance balance with Wellesley and the Permanent Portfolio. Add a small spia to go along with SS and I could put it on auto-pilot. Conservative and simple.
