Sector Model
|
XLU
|
6.69%
|
|
Full Model
|
Date
|
Return
|
Days
|
BT
|
8/11/2015
|
-39.56%
|
565
|
DY
|
10/30/2015
|
6.57%
|
485
|
TMK
|
11/23/2015
|
29.59%
|
461
|
UPLMQ
|
12/1/2015
|
84.79%
|
453
|
NVR
|
12/16/2015
|
16.27%
|
438
|
CMP
|
2/19/2016
|
12.95%
|
373
|
NVR
|
2/22/2016
|
21.17%
|
370
|
ENOC
|
3/15/2016
|
-22.81%
|
348
|
AMWD
|
3/17/2016
|
18.43%
|
346
|
CASY
|
5/12/2016
|
3.12%
|
290
|
AVB
|
5/24/2016
|
3.94%
|
278
|
AEM
|
6/7/2016
|
-9.44%
|
264
|
ESRX
|
6/13/2016
|
-5.74%
|
258
|
AMED
|
6/16/2016
|
-3.93%
|
255
|
FRO
|
6/27/2016
|
-11.79%
|
244
|
ASTE
|
7/12/2016
|
8.79%
|
229
|
MFC
|
9/1/2016
|
35.53%
|
178
|
SFM
|
9/8/2016
|
-1.58%
|
171
|
CFFN
|
9/12/2016
|
10.72%
|
167
|
FIG
|
12/6/2016
|
56.89%
|
82
|
(Since 5/31/2011)
|
|||
S&P
|
Annualized
|
10.34%
|
|
Sector Model
|
Annualized
|
16.78%
|
|
Full Model
|
Annualized
|
13.03%
|
|
S&P
|
Total
|
75.98%
|
|
Sector Model
|
Total
|
143.78%
|
|
Full Model
|
Total
|
102.05%
|
|
Sector Model
|
Advantage
|
6.44%
|
|
Full Model
|
Advantage
|
2.69%
|
|
Previous
|
2017
|
||
S&P
|
66.43%
|
5.74%
|
|
Sector Model
|
120.54%
|
10.54%
|
|
Full Model
|
91.27%
|
5.64%
|
In the news this week is a bet that Warren Buffett made
against hedge funds – arguing that during a 10 year period the S&P would
out-perform any given list of at least five hedge funds selected from the start
of the bet.
The bet is notorious for two reasons: 1) the hedge funds
didn’t line up to bet against Buffett, and 2) the S&P is on track to win the
bet.
What it is not notorious for is that it is a fake bet.
If you want to make as much money as possible over a long
period of time, the S&P will usually out-perform bonds, gold, age to
retirement mutual funds, and for that matter pretty much every mutual fund out
there.
A ten year time frame is usually a good two market
cycles. And if I had been Buffett I would
have suggested SLY (a small cap ETF) instead of SPY (the S&P ETF). In fact that’s exactly what I told my oldest
son a few months ago when he asked about investment advice. ETFs also have the advantage that you don’t
have to pay taxes until you sell, so they are as good as an IRA account for a
similar set of stocks.
So why hedge?
If you aren’t already rich, there’s no need. And, if you have at least 10 years until
retirement there shouldn’t be any need either.
It’s not impossible to lose over a 10 year period, but it’s not common. If you were to make that wager for every 10
year rolling period in your life you’d win the bet most of the time.
And that’s the point of the Buffett bet.
But for hedge funds, it’s a fake bet. Hedge funds are for people who are already
rich and don’t want to lose too much money.
They aren’t trying to gain more than the market long-term, but lose less
in a downturn short-term.
Buffett knew this when he offered the bet. So did the hedge funds when they didn’t take
him up on the bet.
But most of us don’t know it, and so the bet has a
rhetorical point for us: go long – not just long vs short, but long-term vs
short-term. If you want to save for
retirement, give yourself as much time to save, save as much as you can, and
park it in an asset class that USUALLY outperforms the others.
So for my 30 year old son I suggested small caps.
If he were in his early 50s I’d suggest large caps.
After that perhaps looking at bonds. Hopefully in the next 25 years bonds will
become attractive again…
But hedging? To GET
rich? No. Hedging is for those who have too much to
lose. That excludes most of us lower
mortals. If you’re reading a blog online
that’s probably not you.
Tim
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