Messages: What Members Are Asking On-Line
by CI Staff
In the 2004 article you indicated under Morningstar.com—Premium that the reports can be “Exported to File.” This is not wholly correct; only three columns of their choice can be exported.
Also, in the comparison table of that article, you list Yahoo!, Value Line, and Smart Money as not allowing reports to be exported to a file, but in fact they allow reports with all columns to be exported to Excel spreadshee
I would like to offer a couple of additions that may be worthwhile—at least, we have found them to be of interest in our local chapter.
- You provide the total return, but at least a few of our members are not familiar with the technique for converting that to an annualized return, which is probably more useful. Also, it might be worth mentioning that while this strategy didn’t quite achieve Graham’s hope for a return of 15%, it did get a very decent annual return of 12.5%, which is very good for that particular 7.67-year stretch, especially when compared to the S&P 500 annual return of 3.0%.
- The maximum portfolio drawdown is also a major factor for many investors, including myself. If this could have been included it would have been a valuable addition.
CI Editors Respond: Members are frequently asking how to convert year-by-year returns to cumulative returns as well as how to calculate the average annual compound rate of return from a string of annual return figures.
The figure below shows the necessary math. The key item to keep in mind is that you cannot simply sum up a string of annual returns and divide by the number of years to calculate the annual compound rate of return.
The maximum portfolio drawdown can be loosely defined as the largest drop from a peak portfolio value to a bottom over a specific time period. The Simple Graham strategy had its weakest performance during the first year and quarter of its run. We tested the strategy by constructing a hypothetical $90,000 portfolio at the start of 1998. After the first two months the portfolio had grown to $97,475, but then struggled over the next 13 months and bottomed out at $61,797—a $35,678 decline. Drawdown is usually quoted as a percentage: For the simple Graham approach, the maximum drawdown was 36.6%.