My Performance So Far

I believe in being fully transparent about my investment record, good or bad. I find it unfortunate that the public is largely left unable to make informed decisions about the merits of investment managers, advisors and the like - the less competent ones are not too forthcoming about their past. Neither do I feel that they are held as accountable for their actions as they should be. Substandard decisions or performance seem to be forgiven and forgotten too easily.

You need only look at the story of John Meriwether, who played a significant role in the near collapse of Salomon Brothers in 1991, nearly causing a financial disaster if Warren Buffett had not risked his reputation to save the investment bank. In 1994, he founded Long-Term Capital Management (LTCM), a highly leveraged hedge fund. Four years later, it blew up spectacularly, almost bringing down Wall Street again, prompting 14 financial institutions to inject $3.6 billion. Surely people would have learned to avoid Meriwether at this point, but alas, they didn't.

The next year he raised $250 million to start another highly leveraged fund which closed down in 2009 after taking a beating from the global financial crisis. I must give the man some credit, he's certainly persistent - in 2010 he started a third highly leveraged hedge fund, although with far less interest from investors. If someone as high profile as Meriwether can get away losing billions of dollars with minimal consequence, surely there must be thousands of others like him hiding in obscurity.

But I digress. Below is the record that I use to keep track of my performance, as of 14/05/13. If my performance turns out to be decent, you may decide to pay some attention to my ramblings, if it is poor, then I expect you'll immediately browse elsewhere, unless you wish to delight in my financial misery.

Now you may be rather sceptical about the veracity of these results so far, after all, I could have plucked the figures out of thin air. I would be too. Short of looking at all my paperwork or auditing my brokerage account, I'm afraid you'll just have to take my word for it. My intention is to provide periodic updates and post any significant events, such as a buy or sell, so that the authenticity of all future results is unquestionable.

I should add that this is only a record of 2 years and 4 months of investing, which I deem too short to form a definitive opinion of any long term investor's ability. I think 3 years is the absolute minimum whilst a preferable timeframe would be 5 years of results. Nevertheless, the early numbers are encouraging, comfortably surpassing my target of a 5% p.a outperformance of the All Ordinaries Total Return (Accumulation) index. The annualised outperformance currently stands at 11.3%.

You may infer from the figures that my investment style is quite a concentrated one. That would be true: for the first year and a bit, I held only one stock, although I now view that as extreme and unlikely to occur again. This explains the initial volatility depicted in the chart, however, since diversifying into 5 or so stocks (which is still quite concentrated), results have been much smoother. But my views on the topic of diversification vs concentration are too long to expound upon here. Perhaps another time.

Please click on this image and zoom in for a better view