I saw where a poster placing a comment on my blog yesterday said he was tossing in the towel. Hard to blame him. I have been tempted myself. I think if I wasn't writing this blog, I might have quietly snuck into the shadows already. I suppose that makes this an expensive blog.
One reason I haven't quit is I know that as soon as I quit, the method will start working again. John Maynard Keynes is attributed with the quote, "
markets can stay irrational longer than you can stay solvent."
I have not decided whether
- the method doesn't work,
- needs more time or
- needs to be tweaked.
I have decided that the method is riskier than advertised. I suppose that should not come as a surprise. If it really does ultimately get higher returns, one should expect higher risk.
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4 comments:
IIRC, this is the precise reason why, in the introduction to The Book, Andrew Tobias said no mutual fund will follow the mfi: investors are unlikely to stick with a fund during a long period of subpar performence, yet, over the long run, such periods are inevitable. There is no question that we are in one now; the unknown is when the tide will turn.
It would make more sense if people actually tried the system for the recommended amount of time. I don't know if the damn thing works, but I will give it 3-5 years. And by 3-5 years, I don't include the entire year it took me to ramp up my 30 stock portfolio.
I did not read the book until the very end of 2006, and didn't invest any money until the end of January, 2007. But from what I've read, people had some pretty damn good returns early on, in 2006, handily outperforming the market. I suspect everyone was saying how great the formula was then. When it doesn't perform though, the formula must be flawed. This is classic irrational thought.
Like I said, I'm not saying it works or doesn't -- I just know that I don't know yet. I'll start thinking harder about whether it works in January, 2011 (when it will have been three full years with 30 stocks) and make a final decision in January 2013.
You've got a lot of writing to do until then Marsh!
Hang in there! I have to keep telling myself it's a long term process. I started MFI in Jan '07, and it has indeed been a rough ride so far (-9%, -4% vs. S&P500 overall), but like Albert I am willing to give it the 3-5 year time horizon it needs to work.
Most of my losers are still on the MFI list, so I have been rebalancing them on the 1-year anniversaries, buying more at lower prices.
I take some comfort in the fact that of the 4 positions I have CLOSED (admittedly small sample) after 1 year, I am +5.0% in total and beating every index including the S&P500 by nearly 11%.
So, I guess it "ain't over 'til it's over" for me.
Another tidbit: I saw today that the Sequoia fund (SEQUX) is re-opened to investors. The fund is patterned after Graham's approach to investing and has beaten the market handily since 1970. According to Morningstar, they outperformed their category in 332 out of 333 10yr periods. Even so, they trailed the market for 2 consecutive years in '03 and '04. So even the best can have a bad run from time to time...
Keep up the good work, I really enjoy reading your blog as well as all the work you've done for the MFI Yahoo! group. Take care.
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