This represents the final report on my "demonstration" Capital Gains Portfolio. I
terminated this portfolio in June, 2011. I continue to maintain and report on the Dividend
Growth Portfolio, which is a demonstration portfolio for dividend and dividend-growth
investing.
SUMMARY REPORT FOR JULY, 2011--FINAL REPORT
The best metric for measuring a portfolio whose mission is capital gains is total return.
The central idea with a capital-gains portfolio is to grow capital.
The Capital Gains Portfolio had a total return of 51% vs. the S&P 500's gain of
15% during its 2001-2010 lifespan. That means that the portfolio returned 3.6 times as
much money as the S&P 500 Index.
CAPITAL GAINS PORTFOLIO HISTORY
DETAILED REPORT CARD--FINAL REPORT (JUNE 30, 2011)
(1) Total return:
Since inception, this Portfolio grew 51% vs. the S&P 500's 15%.
(2) Stocks and ETFs held in Capital Gains Portfolio:
The portfolio has been terminated. It holds no stocks or ETFs.
(3) Risk control:
Market risk can never be eliminated in stock investing. A bear market tends to bring
about 70% of stocks down with it. Even if the market is doing well overall, an individual
stock can be in its own bear mode. See this article: "The Importance of Controlling Risk
and Minimizing Losses in Stock Investing."
In any event, there are certain common-sense techniques that can be used to manage
risk. The overall goal is to achieve an old Wall Street cliche: "Let your winners run,
and sell your losers."
Here are some of the significant steps to controlling risk:
terminated this portfolio in June, 2011. I continue to maintain and report on the Dividend
Growth Portfolio, which is a demonstration portfolio for dividend and dividend-growth
investing.
SUMMARY REPORT FOR JULY, 2011--FINAL REPORT
The best metric for measuring a portfolio whose mission is capital gains is total return.
The central idea with a capital-gains portfolio is to grow capital.
The Capital Gains Portfolio had a total return of 51% vs. the S&P 500's gain of
15% during its 2001-2010 lifespan. That means that the portfolio returned 3.6 times as
much money as the S&P 500 Index.
CAPITAL GAINS PORTFOLIO HISTORY
- The Capital Gains Portfolio was created April 1, 2001.
- It was a real portfolio with real money. It was not a "model" portfolio that ignored
brokerage fees or other frictional costs. - The opening amount was $50,000. Nothing was added since inception except
for dividends received. - The portfolio was created and managed throughout its life according to the
principles in my book, SENSIBLE STOCK INVESTING: How to Pick, Value,
and Manage Stocks. - The portfolio was designed to demonstrate the results that can be achieved by
following Sensible Stock Investing principles. - Because of growing demands on my time, I terminated the Capital Gains Portfolio
in June, 2011. I now focus my time on dividend growth investing. That does not
divorce me from capital gains: Dividend-growth stocks also enjoy capital gains and
good total returns as well as generating increasing streams of income. - I formerly maintained a Timing Outlook as one of my tools. The Timing Outlook is no
longer maintained. However, for a description of how it was computed, click here.
DETAILED REPORT CARD--FINAL REPORT (JUNE 30, 2011)
(1) Total return:
Since inception, this Portfolio grew 51% vs. the S&P 500's 15%.
- Portfolio begun April 1, 2001 with $50,000
- S&P 500 at beginning date: 1160
- Final value of portfolio (June 30, 2011): $75,616 (+51%)
- Final value of S&P 500: 1321 (+15%)
- Portfolio vs. S&P 500: The Portfolio returned 3.6 times the return of the Index.
(2) Stocks and ETFs held in Capital Gains Portfolio:
The portfolio has been terminated. It holds no stocks or ETFs.
(3) Risk control:
Market risk can never be eliminated in stock investing. A bear market tends to bring
about 70% of stocks down with it. Even if the market is doing well overall, an individual
stock can be in its own bear mode. See this article: "The Importance of Controlling Risk
and Minimizing Losses in Stock Investing."
In any event, there are certain common-sense techniques that can be used to manage
risk. The overall goal is to achieve an old Wall Street cliche: "Let your winners run,
and sell your losers."
Here are some of the significant steps to controlling risk:
- Choose stocks with favorable valuations.
- Try to be out of the market when it is tumbling. One of the big reasons for the
Capital Gains Portfolio's outperformance during its life was the technique of "going
to cash" when market conditions were unfavorable. You may wish to read the FAQ
about my Timing Outlook. You can find it here. I formerly updated the Timing
Outlook every two weeks, but ceased updating it when I terminated the Capital
Gains Portfolio in June, 2011.
- Use sell-stops. Every position in the Capital Gains Portfolio was protected by a
sell-stop. That means that if the price of a stock or ETF dropped to the sell-stop
price that I designated, the stop order converted to a market order, and the stock
sold automatically. That was protection against losing too much money--or giving
back gains--because of price drops.
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