How to Reel in Another Great Year
According to official year-end numbers released by Vanguard, our Gone Fishin’ Portfolio gained 34.3% in 2009 vs. 23.4% for the S&P 500.
This strategy hasn’t just beaten the market since we introduced it seven years ago. It’s beaten the market every single year for the past seven years – and has done it while taking significantly less risk than being fully invested in stocks.
I know of no other long-term capital appreciation strategy that is safer or requires a smaller time commitment.
What’s the secret? We asset allocate – and rebalance once a year – among large and small stocks, foreign shares, real estate investment trusts, gold stocks and three different types of bonds: high-grade corporates, junk bonds and inflation-adjusted Treasuries, using low-cost Vanguard funds or exchange-traded funds (ETFs).
The system is straightforward. There is no economic forecasting, market timing, or individual stock selection. Its genius is an unusual asset mix, broad diversification, rock-bottom costs and high tax efficiency.
How does this portfolio stack up against active money managers? Exceptionally well. History shows that three-quarters of equity managers can’t outperform an unmanaged benchmark each year. Over longer periods, more than 95% can’t.
Yet over the past seven years, our Gone Fishin’ Portfolio hasn’t just beaten the S&P 500, it has outperformed 98% of the nation’s actively managed funds – and Berkshire Hathaway, too.
The system is based on the only investment strategy ever to win the Nobel Prize in Economics. Yet it is so simple to use that it allows you to manage your money yourself in less than 20 minutes a year.
In addition to exceptional long-term performance, The Gone Fishin’ Portfolio eliminates seven major investment risks:
1. It prevents shortfall risk – the risk that inflation will outstrip your purchasing power in retirement.
2. It keeps you from managing your money too conservatively. (T-bills and certificates of deposit won’t do any heavy lifting.)
3. It prevents you from running your portfolio too aggressively. (So you don’t have to worry about your investments going up in flames.)
4. It eliminates individual security risk. (Since there are no individual stocks or bonds, there is no possibility of your portfolio cratering because you own a Lehman Brothers or AIG.)
5. It keeps you from falling prey to Wall Street’s mountain of fees.
6. It prevents the IRS from taxing your portfolio to death. (See my chapter “How to Legally Stiff-Arm the IRS” in The Gone Fishin’ Portfolio: Get Wise, Get Wealthy… and Get On With Your Life.
7. It eliminates the risk of unwise delegation. Since you’re managing your money yourself, there’s absolutely no “Bernie Madoff” risk.
Remember: Time, not money, is your most precious resource. It is perishable, irreplaceable and, unlike money, cannot be saved.
The real beauty of this investment system is that it allows you to redirect your time to high-value activities, whether that’s work you enjoy, time spent pursuing your favorite activities, or just relaxing with your friends and family.
The Gone Fishin’ Portfolio gives you a superb opportunity to grow your wealth. But it guarantees you more time to devote to the people and pastimes you love.
Perhaps that is what recommends it most.
Alexander Green