Despite Uncertainty, Model Shadow Stock Portfolio Still Positive for 2012
by James B. Cloonan
May has taken away much of the stock market gain of the first four months.
This pullback has impacted the Model Shadow Stock Portfolio as well as the general market. The portfolio was up 9.1% for the year as of May 31, 2012, compared to a 5.1% year-to-date return for the S&P 500 index, as measured by the Vanguard 500 Index fund (VFINX). But the Model Shadow Stock Portfolio had been up over 22% for the year in mid-March.
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The stock market hates uncertainty, and uncertainty is with us. In addition to an extension of the eurozone problems because of the government transition in Greece, we have domestic uncertainty as well. The economic picture is not clear. No one knows what the Federal Reserve will do. And election debating points seem to be more important to our government than making decisions about taxes, budgets, Social Security, and Medicare.
Longer-term results and comparisons can be seen in Figure 1 and Table 3. While the pullback in May was disappointing, the portfolio movement for the year-to-date is still upward, and a bit above our average results.
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Discussion
I would like to invest in the Model Shadow Stock Portfolio at this time. Any advise or changes now?
posted 8 months ago by Vince Rappa from New Jersey
To Vince Rappa:
The way I look at the Shadow Portfolio leads me to avoid those stocks that have been in the portfolio for over a year. I looked at the older purchases and learned that most of them had achieved higher values than they had at purchase time. Therefore, my strategy is to buy the recent recommendations and wait for them to appreciate. The older entries into the portfolio often have already had some of their run and may not rise much further. It will take awhile to accumulate the entire portfolio but you will be holding the stocks that are more likely to increase in value.
posted 8 months ago by Bruce Jacobson from Tennessee
Bruce-
That sounds like a realistic approach for a new subscriber looking to get into the Shadow Portfolio, but How do you know when a stock was brought into the portfolio & at what price?
posted 8 months ago by Dick Bureson from Texas
To Dick Bureson The way that the Shadow Portoflio invests is described in the AAII Magazine and also on the Web site. Essentially, they screen a large number of stocks to find those that meet their criteria for investing. Then at the end of each quarter they select up to three stocks to add to the portfolio and buy them. At some time they may make the purchase a few weeks before the end of the quarter. The identity of each stock that they buy is published in the month following the usual investment time and the price that was paid is also listed. Exceptions do occur. In the most recent quarter no purchases were made since the portfolio was full and did not have space for new additions. This was a consequence of not making room by selling matured stocks.
posted 8 months ago by Bruce Jacobson from Tennessee
I am new to AAII.
I counted 29 stocks in the current Shadow Portfoilo. Comments on the following observations would be appreciated:
How does one proceed to implement a Shadow Portfolio if for example an investor were to allocate $100,000 to a Shadow Portfolio investment and assuming there would be 27 stocks in it, by extrapolation then, does one make a dollar purchase of approximately $3500 for each equity?.......and do so within a short period of time in order to create the diversification mass?
If I am overlooking something please advise.
Thank you,
joeyem@gmail.com
posted 2 months ago by Joseph E Mersnik from Ohio
