≡ Menu

10-Plus Years In The Making

Our Portfolio

I am in the middle of writing the annual letter to my clients and cannot help but contain my enthusiasm for some of the good news I’m sharing with them that has been over 10 years in the making. And it’s all contained in the attached chart. Each dot on the chart represents the cross-section of returns for our portfolio – the Core Model Portfolio – versus the S&P 500 Total Return Index. For example, the 10 years ending October 31, 2015, the Core had an annualized return of 15.51% represented on the y-axis while the S&P 500 had an annualized return of 7.85% for the same period represented on the x-axis. Any blue dot above the red line indicates the Core outperformed the benchmark. Any dot below the red line indicates the Core underperformed the benchmark. The result? All the dots are above the line. In other words:

Our portfolio has beaten the benchmark S&P 500 (the market) in every 10-year rolling period in the Core’s existence. In fact, our portfolio has beaten the market in every 3 and 5-year rolling period as well.

core10yearrolling2015

I realize some reading this may not understand the significance of this because they do not realize how hard it is to beat the markets return. Fact is, it is very hard. Very few funds or investment managers accomplish this and definitely not with the resounding consistency we have. According to a Forbes.com, fully 97% of actively managed funds underperformed their benchmark over the 15-year period from 1998 through 2012 in at least five of those years and two-thirds of them experienced at least three consecutive years of underperformance during that span.

We are in rare company. What’s even more remarkable is the very few funds that beat the market may do so say, in a 3-year period, but will fail to do so in a 10-year period and vice versa. By contrast, we have beaten the market in every commonly measured rolling period (3, 5 and 10 years) we have been running the portfolio. We are undefeated. Here are those numbers in more detail:

  • Out of 122, 3-year rolling periods, the Core portfolio beat the market 122 times.
  • Out of 98, 5-year rolling periods, the Core portfolio beat the market 98 times.
  • Out of 38, 10-year rolling periods, the Core portfolio beat the market 38 times.

I am happy with these results, especially since we espouse a long term approach investing. I believe these results validate our approach and as long as we stick to it, should (although there is no guarantee) yield positive results in the future.

As always please be sure to read our disclosure statement at: http://brickfinancial.com/site_tools/disclosure.html
________________________________________

What are rolling periods or rolling returns?

It is best to illustrate what rolling returns are by comparing them to an annual return. An annual return is usually the return reported by your fund or investment manager at the end of a calendar year. Truth be told, an annual return can be any 12-month period. An annualized return is the total return of a multi-year period, say 3, 5, 10 or even 20 years, converted to a compounded annual average return. For instance, if your investment doubled in say 10 years, that would be a 100% total return. But annualized, that would 100% return would be about 7% per year each of the 10 years.

Again, returns are most often reported on a calendar year. But there isn’t really a need to do that. If you only invest in March, the returns reported every December won’t be as meaningful to you. Furthermore, you as a long term investor, meaning you have time horizon greater than 3 to 5 years, should be less interested in year-to-year calendar returns than you are the returns of the multi-year periods. In steps rolling returns.
Rolling returns measure returns over a period not necessarily ending on the calendar year and over periods more typically experienced by investors. For example, a 5 year rolling return may begin January 1, 2006 and end December 31, 2010 and the next rolling return would be from February 1, 2006 to January 31, 2011 and so on.

Forbes article: http://www.forbes.com/sites/timmaurer/2014/04/17/why-beating-the-market-is-an-uphill-skate/#76c83fb739c0
Vanguard Study: https://pressroom.vanguard.com/content/nonindexed/7.5.2013_The_bumpy_road_to_outperformance.pdf

Print Friendly

10-Plus Years In The Making

in Client Letters Mutual Funds Performance Portfolio Management Value Investing Warren Buffett Wealth & Whatnot

I am in the middle of writing the annual letter to my clients and cannot help but contain my enthusiasm for some of the good news I’m sharing with them that has been over 10 years in the making. And it’s all contained in the attached chart. Each dot on the chart represents the cross-section […] Read More

The Wealth Gap: The Role of Marriage

in African-American Interest Frugality Wealth Gap The Wealth Gap: The Role of Marriage thumbnail

I want to revisit the topic of the wealth gap, the disparity in net worth between white and black households. A 20-to-1 disparity. As in the past, I don't want to concentrate so much on the difference itself, but rather some causes of the gap. Previously I talked about how purchasing a home falls short […] Read More

The Wealth Gap: The Role of Conspicuous Consumption

in Wealth Gap The Wealth Gap: The Role of Conspicuous Consumption thumbnail

source: sidehike The Pew Study reports a stark difference in wealth between black and white households. The median wealth of white households is 20 times that of black households. The study points to differences in home ownership as the culprit. In a previous post I suggested it is not the difference in home ownership that […] Read More

We Still Beat The Big Dogs (Part 1)

in Client Letters Efficient Markets How To Make A Million Investing Mutual Funds Portfolio Management Value Investing

Two years ago I posted results of the Core Model Portfolio over 1, 3, and 5 years against those of several indices including the S&P 500 and equity mutual funds. Source: Small Dog, Big Pag As was the case then, the Core performed well versus its benchmarks. In 2012 the Core yeilded 27.88% versus 16.00% […] Read More

BBQ: How Much Will It Take To Make A Million

in Brick Book Quote Frugality How To Make A Million Mutual Funds

Millionaire by Wayne Wagner & Al Winnikoff I'm starting a new post category called Brick's Book Quotes. There's a lot of good information out there but I know most people won't read one book let alone the many of read on the topic of personal finance and investing. So I'll save you the trouble of […] Read More

What The Wealthiest 1% Have Most In Common

in Frugality In Defense of Frugal Investing Money & Mind Wealth & Whatnot

I'll get to the punch line quickly on this one. Several surveys show the wealthiest Americans have one thing most in common. They are married or cohabiting and have been for more than 20 years. In fact, over 96% are in such relationships. Living with a partner is so correlative to wealth creation that one […] Read More

5 Things To Be Thankful For 2012

in Benjamin Graham Berkshire Hathaway Bull Market In Defense of Frugal Value Investing Warren Buffett Wealth & Whatnot

Back in 2008, around Thanksgiving time, I wrote a series called "5 Things To Be Thankful For In This Market". Each of those five things were: 1. The Teachings of Benjamin Graham 2. Low P/E Ratios 3. The Inevitable Market Rebound 4 & 5. Black Eyed Peas and Collard Greens If you recall, the sky […] Read More

What’s The Deal With Netflix

in Netflix Retail Risk

Netflix’s (NFLX) stock price has been extremely volatile over the last six months, ranging from a high of $124.84 to a recent low of $53.87, in that time. I first bought into the stock for clients last November in a range above $85 after a steady decline in the stock price over a period of […] Read More

Change Is Good

in Berkshire Hathaway Value Investing Warren Buffett

The difficulty is not in the new ideas, but in escaping the old ones." - John Maynard Keynes Warren Buffett is famous for not investing in technology. He is also famous for avoiding international shares. He also has been known to avoid railroads. But things change. Buffett announced this morning on CNBC, he has bought […] Read More

Starbucks Does Well By Doing Good

in Greater Good Starbucks

Starbucks reported earnings yesterday and profits were up 29% in the fourth quarter. The company bested Dunkin Donuts in same-store sales as well. Theirs rose 10% while its main rival's rose just 6%. The company credits its recent success with brand loyalty among its customers. source: Benjamin Taylor I for one have been a loyal […] Read More