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Motley Fool Global Gains / GGM: Global Gains Philosophy
|Subject: My experience with GG stocks and indices||Date: 4/19/2012 10:25 AM|
|Author: anuragupta||Number: 4802 of 5164|
The only way to compare GG scorecard (or any other TMF newsletter scorecard with any index is doing a monthly average return. The easiest way for an investor to fool oneself is look the returns in the form of (1mo, 3mo, 1y and 3 y) and make decisions. This is how the mutual fund industry fools people. This is one reason why I like TMF's unique monthly average returns so much. Few appreciate this metric but this is the most transparent and useful metric.
I did the painful exercise with VWO. I calculated the average monthly return with VWO starting from Dec 2006 till April 2012. Result? 10.1% gains - close to GG scorecard 9.4% gains. GG scorecard already reports SP500 gains as 13% on this calculation. My calculation does not include the dividends for VWO which will only make it higher.
For the last 4 years, I have been buying VWO several times a year during dips (disproportionately higher capital investment during deep pullbacks) and as a result my monthly average return is way higher than the one done by mechanical means. My average annual returns with VWO for last 4 years now exceeds 15%. So easy to do with a well diversified and high quality index based on a volatile and emerging economy.
In case of GG, I have a handful of winners. The way I accelerate my returns is to keep deploying capital and widely (15-30%) separated value points (as opposed to price points) to the good firms and build a momentum. Although I have not calculated I have a feeling that despite debacles like the rural basket where I lost 2% of my current portfolio capital (4% when I invested), my returns are much better than GG scorecard due to fresh capital concentration on firms with rising value. SO I do not know how they compare with VWO. But I know that I had to jump a lot of hoops with the individual GG stocks to reach here. VWO was so painless. With time, I am reducing my exposure to new GG stocks and concentrating more on indices. I find it much better to obtain multibaggers from SA, HG and RBS newsletters. So it makes sense to focus on individual stocks from those newsletters and use indices for other areas. It is quite possible that in future the only reason why I keep GG sub is to track just a dozen stocks.
My recent (last 1-2 years) indices are EIDO, PLND and AFK. Already, with EIDO, my returns now smash GG's TLK by a wide (>50%) margin). EWY has allowed me to capture the growth of a far cleanly governed market (than China) of South Korea. Same technique. Accelerated buys on dips of quality indices. I am unable to do so with PLND as I have less conviction and understanding over there. I got into GG introduced DGS last year (high yielders from emerging markets) and plan to similarly build a large position into it. I think this will be really easy.
Conclusion: After 5+ years, monthly averaging into something like VWO yields better returns than GG scorecard and with far less effort. One can boost returns easily by disproportionately investing higher into indices during the dips.
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