Beating The Market Is Easy: Just Make Lots of Noise To Confuse
06/27/2011 0 comments
Jason Zweig, the Wall Street Journal's The Intelligent Investor's columnist recently wrote: "Beating the market is easy. Just understate its performance. Various investment promoters are touting their stock-picking prowess by comparing their returns, including dividends, to the Standard & Poor's 500-stock index without dividends."
In the article, he specifically referred to The Street.com's Jim Cramer's recent email promotion. We quoted the article here: "with the subject line "My portfolio is CRUSHING the S&P 500," the email said Action Alerts PLUS is "producing some truly incredible results." From Jan. 1, 2002, to April 1, said the email, the portfolio's "total average return has averaged more than DOUBLE the return of the S&P 500." An accompanying bar graph showed the S&P 500 returning 15.5%, versus 39.2% for Mr. Cramer's portfolio."
But if you included the S&P dividend in the calculation, the cumulative performance of Action Alerts PLUS would be only 0.9% higher over the total S&P 500 return. Yes, it is still higher, but it also comes with 774 trades in the past 3 years, not counting the annual subscription fee of $299.95 (the first year).
Cramer is not alone. There are tons of this 'oversight' promotion touting products that beat S&P 500 or other market indices big time.
Do you want to get the excitement and confused? That would be up to you. In the meantime, if you want to a simple yet trackable portfolio, day in and day out, look at MyPlanIQ's Six Core Asset ETFs that consists of only six ETFs: VTI, VEU, VWO, VNQ, DBC, BND. Here are the portfolio performance comparison:
Portfolio Performance Comparison
| Portfolio/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Six Core Asset ETFs Strategic Asset Allocation Moderate | 16% | 159% | 4% | 16% | 8% | 39% |
| Six Core Asset ETFs Tactical Asset Allocation Moderate | 12% | 123% | 8% | 68% | 15% | 107% |
| SPY | 20% | 107% | 1% | -1% | 2% | 4% |
| VBINX | 14% | 139% | 4% | 20% | 5% | 25% |
| VFINX | 19% | 106% | 1% | -0% | 2% | 4% |
More detailed comparison, see here.
By the way, all of our performance numbers are total return (i.e. including dividend reinvested) based. You won't conveniently misled due to some oversight errors.
Symbols: VTI, VEU, VWO, VNQ, SPY, DBC, BND, VFINX, VBINX, Portfolio Strategy
Exchange Tickers: (VTI), (VEU), (VWO), (VNQ), (SPY), (DBC), (BND)
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