Message Font: Serif | Sans-Serif
No. of Recommendations: 6
<My biggest one is why would you want to short the S&P 500? I mean if it keeps going up, they're going to lose about 11% historically over the long run. Why would I want to set myself up for failure and make it that much harder to beat the market.>

Hi fatdiesel,

Just strolling here, I was invited and thought I'd put in my $.02. I wish I had a more positive review of this service but I can't help the fact that I don't.

Two things. One, your 11% historical return on the S&P500 is not a realistic expectation for a number of reasons, including the fact that a lot of that historical growth has taken place as result of increased P/E ratios that were driven by higher liquidity of modern markets, as well as increased sophistication on the part of investors. I think, and Warren Buffett thinks this too, that 8% from here on out is a more realistic S&P500 growth expectation, with dividends reinvested.

Two, I suggested the shorting of SPY as an easy way to see by how much the portfolio is beating its benchmark, not so much as an investment strategy. I understand why TMF isn't going to do that -- it goes against the long-term buy and hold policy and is too complicated to explain to the average subscriber -- but there are advantages to investing in such a way. You have some downside protection but your gains are explicitly tied to your ability to pick stocks, not to the variances of the stock market. At historical highs like right now, people seem to forget that the market can and does go down -- and can, in fact, stay down for VERY long periods of time, sometimes for well over a decade. In such an environment, good stock-picking is of little consolation.

My concern is that one year from now the marketing materials will say: the portfolio is up 15% (or something like that) but won't give any accurate sense of by how much the benchmark index has gone up or down. It opens up a Pandora's box for all sorts of unintentionally misleading information. Consider what happens if one year from now only 25% of the portfolio is invested into stocks and the rest is in cash. But say the stocks that were picked are up 30% on average. Now, TMF could accurately claim that "average selection is up by 20%" but that doesn't mean that the gain on the portfolio is 20% -- it's only 5%, plus whatever interest the other $750,000 generated.

I'm going to cancel my 30-day free trial in the next few weeks but I just want to make it clear that I think this service is ultimately a good idea and will probably help a few subscribers get a sense for how to pounce on opportunities and when not to pull the trigger. But I also think that the service costs way too much and for the great majority of those who were invited offers very little in terms of additional benefits that they can't get with a single newsletter.
Print the post  


Got questions? Check here first.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.