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Performance – Trailing 3 Months

Posted by kdadmin on April 1st, 2015.

For near term analysis, I’m a fan of trailing three month returns. Consider the recent period of December 1, 2014 to February 28, 2015. During that time, we outperformed the S&P 500 by about 0.40%. This, despite being roughly 40% in bonds and/or often with large cash stakes (taking substantially less risk than the S&P 500). If anything is a testament to asset allocation, it’s results like these. It’s also a testament to taking money off the table when the market is unreasonably neurotic.

Now, of course, past performance is no guarantee of future results, but it’s nice to see when the wisdom gained from those advanced degrees and twenty-five years of portfolio management experience works so well in erratic markets. A benchmark for a portfolio with 40% in bonds is AOM (a moderate allocation ETF), which only did 0.96% over the same period. In other words, in this market, at this time, with this allocation, cheaping out and just stuffing your money blindly into a broad market mutual fund, would have left you out in the cold.

In other, other words, don’t think that it’s likely to get these sort of results from some newbie, or someone in a related financial field who thinks they can manage money as a sideline business. This is not a hobby.

The following chart shows the comparative return of AOM (in orange) and the S&P 500 (represented by an ETF called SPY in blue).

Spy vs AOM

I run these sorts of analyses on a regular basis to help make sure the portfolios are trending properly. Raw performance is an interesting metric, but the true testament to a portfolios strength is relative performance to a given benchmark in a certain type of market. To put it another way, driving 100 miles doesn’t really tell you anything about your car’s performance. But driving 100 miles on 2 gallons of gas certainly does.

When the first quarter numbers for 2015 come out in the next a couple of days, I’ll run the same analysis to see how we did. I’ll keep you posted.I can’t wait …


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