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.