How many times has this happened to you? You're at a social function and the conversation turns to investing. Pretty soon, people are comparing how well their investments are doing. As you might imagine, being an investment advisor this happens to me a lot. However, I recently had an experience with it that startled me.
Bob, one of the guys I was chatting with at a party, asked what kind of returns I had made for my clients with my methodical no load mutual fund strategy during the past year. I replied that they had unrealized gains of slightly over 29%, after management fees, for the 8 months that we were invested.
Bob countered with a smirk that he had made a 40% return. I raised my eyebrows and told him that was darn good-and suggested that maybe he ought to be managing my money. At that point we were interrupted and, as the evening went on, I began to wonder exactly how Bob had gotten his great return.
I cornered him a little later on and, upon digging a little deeper, the story looked somewhat different. Yes, he had made a 40% return on a mutual fund he had some money invested in, however, we were comparing apples and bananas.
He had a total portfolio of $100k. Being cautious, he had invested only $10k into a mutual fund, from which he profited $4k after he sold it. The balance of his portfolio ($90k) was sitting in a money market fund earning some 0.35% per year.
So, while he had made 40% on 10% of his investment, he had only made 4.35% on his whole portfolio. My methodology was also focused on protecting my clients' investments and it had increased their entire portfolio 29% (unrealized). That would be an apple to apple comparison when measuring my returns against his. Bob's one fund realized 40% return. However, had I approached it the same way Bob had, I could have described one of the funds I used that had realized over 49% for the same period.
Actually, Bob's not-so-good-news story didn't stop there. Bob admitted to having followed the losing Buy and Hope strategy through the bear market of 2000 and had finally sold out at a 50% loss a year ago, before committing $10k to a mutual fund investment.
I was pleased to be able to tell him that my methodology had gotten my clients out of the market before the bear took his big bite, and they suffered only minimal losses before finding safety in money markets accounts. And when my trend tracking figures directed us to move back into the market, they still had most of their money poised to start earning for them again-which it did and very nicely, thank you.
The moral of the story is to look past the surface and don't take any numbers thrown at you at face value. Remember, most people returning from a weekend in Las Vegas will shout about their winnings and mumble about their losses.
About The Author
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com.
one time home cleaning Highland Park ..It looks like we have now entered a new bull... Read More
When you become interested in a stock or mutual fund... Read More
Wall Street has been preaching for years and years to... Read More
Have you bought any mutual funds this year or late... Read More
I cringe every time I hear a novice investor tell... Read More
During the day I watch CNBC-TV, the stock market channel.... Read More
Every broker and financial planner will tell you that you... Read More
Last time we looked at the real performance of the... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
You read and hear a lot about hedge funds. Unfortunately,... Read More
This is a rather simple strategy with which I am... Read More
All stock trading and investing methods must deal with the... Read More
The spring-loaded rat catcher is the ultimate low-tech device invented... Read More
Many people would like to diversify their portfolios to expand... Read More
From the book 'The Stockopoly Plan' by the author Charles... Read More
Humpty Dumpty had a great fall and all the King's... Read More
Over the past few months, several investment professionals have brought... Read More
Whenever I see mutual fund comparisons in the trade publications... Read More
Reach in your pocket and take out that big roll... Read More
We've all heard of the stock market and probably have... Read More
Let's first define insanity. It is doing the same thing... Read More
Invest in the stock market for the RIGHT reason, using... Read More
If you're like many investors who squander those small dividend... Read More
(1) Stock Market is Tough Place to Make Any Money... Read More
It has been said that low cost or even free... Read More
licensed cleaning services Park Ridge ..When it comes to mutual funds, there is a lot... Read More
The Shadow knows. There used to be a radio program... Read More
You must take the time once a month to review... Read More
Mutual funds and brokers are always preaching not to buy... Read More
Everyone who follows the financial news has heard of mutual... Read More
In a previously written article, we expanded the use of... Read More
We've all heard of the stock market and probably have... Read More
Having lived aboard a sailboat for 2 years I was... Read More
The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More
THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More
You read and hear a lot about hedge funds. Unfortunately,... Read More
If you have talked to a stock broker or financial... Read More
Ever turn down a street, get half way and suddenly... Read More
Mutual funds were moderately successful in creating a presence in... Read More
The recent criminal fiasco in the mutual fund industry is... Read More
Robert Rodriguez likes to buy stocks at their lows. When... Read More
The Shadow knows. Remember him? It seems a shadow has... Read More
What are you thinking when it comes to your no... Read More
Recently I watched my favorite football team lose a vital... Read More
The following are a list of nine things you want... Read More
I receive emails from Morningstar. This company provides statistics and... Read More
Very few people, even professionals, have heard of the Dalbar... Read More
You remember (they show it on TV every year) the... Read More
Has your broker been calling you recently with the "great... Read More
You have a lock on your house. You have a... Read More
Stocks & Mutual Fund |