Annual Update
Our Gone Fishin' Portfolio Has More Than Quadrupled
In 2024, the S&P 500 returned nearly 24%. Many of our Oxford Club portfolios did even better.
The Gone Fishin’ Portfolio was not one of them. It returned 9.2% last year.
That beat last year’s annual return for value stocks, foreign stocks, preferred stocks, real estate investment trusts, Treasurys, high-grade bonds, high-yield bonds, mortgage securities, and money markets.
But it didn’t beat the S&P 500, where seven stocks - Apple, Amazon, Meta Platforms, Nvidia, Alphabet, Microsoft, and Tesla - make up nearly a third of the index and were responsible for 57% of its return in 2024.
In our trading portfolios, the goal is to outperform the market with individual stock selections.
Yet with the Gone Fishin’ Portfolio - our most conservative strategy - the objective is different.
Our goal is to beat inflation and earn high returns with as little risk as possible.
The portfolio is based on a Nobel Prize-winning strategy built on the most advanced principles of money management.
The strategy is simple and straightforward. You divide the portfolio among 10 different asset classes - represented by 10 different funds - that reflect our Oxford asset allocation model.
Then once a year you take 20 minutes to rebalance it. This forces you to sell asset classes that are high and buy those that are low.
Rebalancing is done by selling some shares of the funds that have appreciated the most and using the proceeds to add to the ones that have lagged, thereby returning each fund to its original allocation.
(Or, if you have fresh money to invest, you can simply put it to work in the lagging asset classes, also returning the portfolio to the original allocation.)
The rest of the time you are free to “go fishin’,” whether you define that as golf, travel, time with the grandkids, or casting a line in the shade somewhere.
As our long-term track record attests, the strategy works. It is also low risk.
Investors who own the Dow or S&P 500 are 100% invested in equities.
That means they ride out every downturn and correction in the market without a shock absorber.
Our Gone Fishin’ Portfolio, on the other hand, has 30% of its assets invested across high-grade bonds, high-yield bonds, and inflation-adjusted Treasurys (or TIPS).
The result: less volatility - and fewer sleepless nights.
The Gone Fishin’ Portfolio takes a global approach and has substantial exposure to international markets, which make up 41% of the world’s equity market capitalization.
Those bourses underperformed the U.S. market last year.
Indeed, over the past 15 years - from 2010 to 2024 - the S&P 500 delivered an impressive annual return of 13.3% compared with just 5.9% for the MSCI EAFE Index, the leading benchmark for international stocks.
Yet history shows that when foreign stocks take off, they really sprint. And international equities are overdue for a big move.
Will 2025 be the year? We’ll know for sure in 12 months. But we can already see that the valuation gap between international markets and our domestic market is as wide as it has been in modern times.
European stocks, for example, trade at 13 times projected earnings for the next 12 months versus 22 times for the S&P 500.
When reversion to the means occurs - a return to normalcy, in other words - the gains in international stocks should be substantial.
This is also true of value stocks and small cap stocks, two other asset classes that have unperformed the megacap-heavy S&P 500 over the past several years.
Why do we use index funds in this portfolio rather than actively managed funds?
Because our strategy is based on real-world results... not big promises.
History shows that 3 out of 4 active fund managers underperform their benchmark each year. Over periods of 10 years or longer, almost 90% of them do.
In the world of actively managed funds, investors don’t get what they pay for.
Investment consulting firm Greenwich Associates notes that “over 10 years, 83% of active funds in the U.S. fail to match their chosen benchmarks; 40% stumble so badly that they are terminated before the 10-year period is completed.”
That is why low-cost, tax-efficient index funds are the best foundation for a long-term investment program.
I’m often asked why commodities aren’t part of this portfolio.
They are - indirectly - as our equity funds hold all the world’s leading natural resource companies.
We also have a 5% allocation to the VanEck Gold Miners ETF (NYSE: GDX).
Precious metals were one of the few commodity sectors that had a positive return in 2024. The Gold Miners ETF finished the year up 11%.
But a broad commodity index is not part of the portfolio because it would be a drag on returns.
Yes, commodities have occasional periods of strong performance. And they are not well correlated with stocks and bonds. But their poor long-term returns make them an unworthy addition to the portfolio.
The Bloomberg Commodity Index, for example, returned less than 1% in 2024.
Let’s look at the performance of this strategy since inception...
An investment of $100,000 in the Gone Fishin’ Portfolio in January 2003 - with dividends reinvested - was worth $546,436 at the end of 2024.
(These figures are net of all costs and can be verified using Vanguard’s own numbers.)
In sum, the Gone Fishin’ Portfolio allows you to manage your serious money in a serious way. It - or something very much like it - should be the foundation of your investment program.
Why use this strategy? Because it eliminates six major investment risks...
- It keeps you from being so conservative that your purchasing power fails to keep up with inflation.
- It prevents you from being so aggressive that your portfolio - or a large portion of it - goes up in flames.
- It eliminates individual security risk. (Each investment is a broadly diversified fund, so there is no chance of a single security - think Lehman Brothers or Silicon Valley Bank - causing your portfolio to crater.)
- It ends delegation risk. You can easily manage this portfolio yourself. That means no one can mismanage your money, run away with it, or siphon off an ocean of fees.
- It avoids economic forecasting and market timing. Since these can’t be done accurately and consistently - and therefore don’t add value - they are no part of this strategy (or any of my other investment strategies, for that matter).
- It ends wasted time and effort. While other investors spend countless hours evaluating market data, financial advisors, or competing theories about the future, you will have gone fishin’ instead.
Fully consider that last point. Your most valuable asset is not your home, your bank account, or your investment portfolio.
It’s the amount of time you have left on this little blue ball.
The Gone Fishin’ Portfolio is a long-term asset allocation strategy that gives you a high probability of growing your net worth and meeting your most important investment goals.
It also guarantees you more time with the people and pastimes you love.
Perhaps this last benefit is what recommends it most.
Good investing,
Alex