Model Shadow Stock Portfolio Reaches an All-Time High
The run of strong performance in smaller-cap stocks that began in December 2011 has carried through January and February, and micro caps have led the way.
The Model Shadow Stock Portfolio is up 17.2% year to date compared to 9.0% for the S&P 500 as measured by the Vanguard 500 Index fund (VFINX). The model portfolio is now at an all-time high.
Other results and comparisons can be seen in Figure 1 and Table 3. We have added new columns to Table 3 to show the cumulative values of a $10,000 investment since inception of the Model Shadow Stock Portfolio in 1993. Notice the difference between the $185,923 present value of $10,000 invested 19+ years ago in the Model Shadow Stock Portfolio compared to $44,844 for VFINX and $56,358 for the Vanguard Small Cap Index fund (NAESX). What seems like a modest annual difference compounds very significantly over the years.
The Model Shadow Stock Portfolio’s 16.5% annual average return since inception almost 20 years ago underscores a point made in Mark Hulbert’s article in the January 2012 AAII Journal (“Believing Performance Claims: A Triumph of Hope Over Experience”). Hulbert argued that 15% seems to be about the maximum long-term return possible without the additional techniques and leverage of hedge funds, which are not available to individual investors, or the ability to influence management behavior, which an investor like Warren Buffett has.
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