Results for 2012

The raw S&P rose 13.4% in 2012.  Plus dividends and minus expenses, the yield was 15.8%.
 
Our yield for 2012 was 4.8%, despite the fact that we maintained a daily average of 86.4% of the portfolio in money market. 

The money market percentage is misleading; the variable-price (VP) fraction could have been (and was) in abnormally volatile funds.  In fact, the vast majority was in ProFunds, which use leverage to aim for 1.5 to 2 times an index.  Assuming that the ProFunds we owned had a volatility of 1.75 times the S&P 500, we had the equivalent of 76% in money market.  The 1.75 is the average of the ProFunds multipliers of 1.5% for sector funds and 2% for international funds.  In the middle of 2012 we started recording the daily volatility of the portfolio relative to S&P 500.

If the yield is 4.8%, and if 100% of the portfolio had been in VP funds, then our yield would have been 4.8% times 4, which is 19%.

Note that nobody has a formula to decide whether our results are good.

FundSense Mutual-Fund Survival Program

From 2002 Jan 1 to 2011 Jul 31 (9.6 years):

20-week Friday MA, S&P 500 DE or money market.. +52.4%

Berkshire Hathaway.................................................... +50.1%

FundSense mutual-fund survival program.......... +41.0%

Long treasurys............................................................ +38.5%

S&P 500 DE (plus div. but minus exp.) (buy & hold).. +33.8%

One-year CDs.............................................................. +31.0%

Fund managers, average actively managed............... +24.2%

Consumer Price Index (CPI)....................................... +22.9%

Money market............................................................. +16.2%

House prices, Case-Shiller US 20-city average........... +15.9%

Fund investors, average.............................................. +13.6%

S&P 500 price return.................................................. +12.6%

Financial advisors....................................................... unknown

FundSense is suitable for individual investors, financial advisors, software packagers, financial web sites, hedge funds, funds of funds, and financial software (Quicken/Mint).

FundSense offers a trading-station interface and generates IRS Form 1040 Schedule D. The program pays no commissions or early-exit fees, did not profit from leverage or insider knowledge, and required no trading on 48% of market days.

Notes: The 20-week moving average (MA) calculates and trades on Fridays only; the investor is always either 100% invested in the S&P 500 DE (dividends minus expenses) or 100% in money market. The S&P 500 DE uses the Bloomberg (SPTR:IND) and Yahoo (^PXTY) S&P 500 total return but adds annual expenses of 0.17% for buy and hold or 0.7% for a moving average. The S&P 500 price return is the readily available index; Bloomberg says the index includes "special cash dividends." Berkshire Hathaway management had insider access; at inception, shares were not available to small investors. FundSense and moving-average returns include the yield on principal that is temporarily in money market. CD and treasury yields are from hypothetical benchmarks that assume direct purchases that are held to maturity yet roll over every Friday. The long-treasury benchmark tracks the yield to maturity on the 30-year bond before 2001 Oct., and on the 10-year note thereafter. The CPI underreports inflation (shadowstats.com). The Case-Shiller US 20-city composite has a two- or three-month delay. The average fund manager underperforms the S&P 500 TR at a rate equal to fund expenses (John R. Talbott The 86 Biggest Lies on Wall Street 2009 p. 81); fund expenses in my survey are 1.20% per year. Average mutual-fund investors underperform their funds by 1.1% per year (Kevin Laughlin via Jeff Sommer NYT 2011 Jan 2).

Hunter Greer, Ashland, OR

huntergreersw@gmail.com

Mutual-Fund Trading Algorithms Report

My mutual-fund trading algorithms in an 9.0-year trial beat the S&P 500 by 28.8%.

Total return from 2002 Jan 1 to 2010 Dec 31:

Berkshire Hathaway...................................................+62.9%

My mutual-fund trading algorithms................+40.0%

Long treasurys...........................................................+36.7%

One-year CDs.............................................................+30.3%

CPI.............................................................................+20.6%

US house prices, Case-Shiller 20-city.......................+20.5%

Money market...........................................................+16.2%

S&P 500 Index...........................................................+11.2%

Average fund manager..............................................+0.4%

Average fund investor................................................-9.5%

Financial advisors...................................................unknown

The algorithms are suitable for individual investors, financial advisors, software packagers, financial web sites, hedge funds, funds of funds, and financial software (Quicken).

The algorithms did not profit from leverage and required no trading on 37% of market days.

Notes: Berkshire Hathaway management had insider access; at inception shares were not available to small investors. The algorithms' return includes principal temporarily in money market. CD and treasury yields are from proprietary benchmarks that assume all instruments are held to maturity yet roll over every Friday. The long-treasury benchmark uses the yield on the 30-year bond before 2001 Oct., and on the 10-year note thereafter. The CPI underreports inflation (shadowstats.com). The Case-Shiller US 20-city composite has a two- or three-month delay. Fund managers underperform the market at a rate equal to fund expenses (John R. Talbott The 86 Biggest Lies on Wall Street 2009 p. 81); fund expenses in my survey are 1.20% per year. Mutual-fund investors underperform their funds by 1.1% per year (Kevin Laughlin via Jeff Sommer NYT 2011 Jan 2).

Hunter Greer
800 Harmony Lane
Ashland, OR 97520
fundsense at aol.com

Fund Sense Spreadsheets

Hunter Greer, designer


Know Your Portfolio

An annual report has nothing to do with your results. You don't buy everything at the beginning of January and sell everything at the end of December. Even if you did, mutual-fund managers routinely fail to beat unmanaged indices. Individual investors are on average even less successful. Do you know whether your returns--from trading or holding--lagged stock indices, bank CDs, or even money market funds?

A market is an average of crowd perceptions of long-term prospects. Unfortunately tomorrow's news will create a new long-term opinion, and only inside traders guess that opinion today. Rather than forecasting, the Fund Sense spreadsheets prepare you for whichever way the markets move. Market direction is a chance event, but chance favors the prepared mind (Louis Pasteur).


The Fund Sense Spreadsheets

Log spreadsheets record your trades and evaluate your performance vs. benchmarks. The Logs predict taxes, fees, penalties, wash sales, and sales charges.

The Buy/Sell spreadsheet warns you of a fund's transaction restrictions and allows you to set buy and sell signals. Strategy options include asset allocation, dollar-cost averaging, moving averages, momentum, value, stops, and cyclical models.

The Net Worth spreadsheet tallies how you're doing overall.

Indicator spreadsheets use indices and exchange rates to predict daily closing prices.

Charts track NAVs and distributions, including total return for bonds.


Users

Financial planners and advisors can use the Fund Sense spreadsheets to educate and advise clients.

Individual investors can run the Fund Sense spreadsheets on a home computer.

The underlying code is for sale to proprietary financial programs.



System Requirements and Customization

The Fund Sense spreadsheets run on any computer that has the Microsoft Excel application program.

Customization for the user's internet service provider, operating system, and macro program allows full automation of the spreadsheet suite.


Results

For myself, in the six years from 1 Jan 1999 to 31 Dec 2006, the Fund Sense prototypes yielded +5.3% per year while the S&P 500 returned +1.9% per year.

For client B, from 1 Jan 2002 to 6 Nov 2008, Fund Sense beat the S&P 500 by 6.2% per year.

As always, historical results cannot predict future returns. Moreover, your returns are a function of the spreadsheet parameters you choose.


Full-Service Clients

I charge full-service clients only if I beat a client-specified benchmark (for example, a combination of the S&P 500 and money market rates). As my fee I ask for 10% of the profits beyond the benchmark.

I currently manage $83,000 for one full-service client.


The Designer

I began building the Fund Sense spreadsheets in 1994.

My background is in chemistry and biology; my day job is freelance science and technical writing and editing. At Apple Computer I edited and wrote technical manuals and worked with firmware coders and interface designers.


Contact Information


For financial advisors, investment clubs, user groups, and individual investors:


Hunter Greer
Ashland, OR

e-mail to fundsense at aol.com


Energy Stop

Wednesday, 27 December 2006 2:22 A GMT

Today I completed selling all holdings in the energy sector and moved the proceeds to money market. As usual, I have no idea whether I'll want to stay out of energy funds, but I do want to limit the decline from the high. The market will quickly tell me whether I'm right. If any fund in the energy sector re-acquires momentum, I'll buy back--being careful not to create a wash unless absolutely necessary.


Energy Re-Buy, but Small

Wednesday, 10 January 2007 2:33 A GMT

Today we made a small buy of AIM energy. The other three energy funds we follow are still waiting for the wash period to expire.

DWS Scudder Destroys Pacific Opportunities

Tuesday, 23 January 2007 6:04 A GMT
DWS Scudder has announced its intention of merging the Pacific Opportunities fund into the International fund (most recent renaming: International Select Equity fund). This merger is severely stupid, for two reasons: 1) Of the Scudder funds I follow, I believe Pac Op is the best-performing for the rolling year. 2) Removing Pac Op puts a geographical hole in the Scudder lineup.

Destroying Pacific Opportunities is the dumbest move by fund management since American Century decided to close, immediately before natural resources began a multiyear boom, its Global Natural Resources fund. My point is not that anyone should be able to predict a boom (or bust), but that mutual-fund companies in their own interest should maintain diverse fund options. Diversity maintains the total under management in the family, even though the size of the particular fund itself doesn't allow a Cheney-level management rake-off. I've already voted my proxies against the proposal, and so has my client, for a total of approximately $13,000 in "no" votes. Nor do I believe Scudder will play fair with totaling the votes--witness how American Century changed the rules after the GNR proxy vote went against management, and how H-P pressured institutional voters to approve the Compaq merger. I'm making plans to move my Asia ex-Japan money to AIM--an option only if your AIM account is no-load, pre-merger Invesco shares.


China Crash Update
Wednesday, 7 March 2007 1:42 A GMT
One comment I haven't heard about the market down days starting 27 Feb is that investors remember March 2000 and are attempting to respond correctly this time. I know I am.

For the record, in two taxable accounts we were 55-56% in cash as of the close on 5 March, 91% cash for an IRA. We obeyed a stop, but we also have a go. The advantage of IRAs in a crash is that the investor can re-buy without worrying about wash sales.

Meanwhile we're beating the the S&P 500 by 6.7% per year since Jan 2002, down from 7% before the down days.


Fidelity's Lack Thereof
Tuesday, 27 March 2007 12:22 A GMT
Fidelity is above the industry mean in terms of providing timely or accurate year-end distributions, but as of 26 March 2007 the company is being covert about early-April distributions, even as to record dates. We don't want to dodge distributions, but we do want to avoid inadvertently buying them.

China Syndrome
Monday, 23 April 2007 3:04 A GMT
On 27 Feb we began selling whatever funds were free of washes and holding-period fees. We reached 50% in cash in mid-March. If individual funds hadn't resumed positive momentum before we were free of washes and fees, cash would have reached 100% by the end of March. By 20 April we're 5% in cash (again). Exact numbers soon.


Now Even with S&P
Wednesday, 6 June 2007 4:50 A GMT
For the client portfolio we have again risen to even with the S&P 500 in terms of year-to-date return. We had begun lagging in mid-March.

We're now down to approx 5% in cash, but the number we like is that we can sell 58% of our noncash without having to worry about washes or short-hold fees.