On Tue, 29 Apr 2008 04:04:13 -0500, "Walter_Slipperman"
<WalterS[at]nospam.com> wrote:

- quote -

As you have noted, your volatility is less than that of the S&P 500.

Another way at looking at risk, or risk-adjusted return, is the Sharpe
ratio. http://www.stanford.edu/~wfsharpe/art/sr/sr.htm

Although it can be computed versus various indices, classicly the benchmark
is a risk-free investment. For this purpose, I chose to use the return on
a one-year Treasury as of the first of each year.

For 2000-2007, the Sharpe ratio of the S&P500 was -1; and yours was +49.

Here is some data (the Indices are total return indices):

Year Treas SP500 MD400 SC600 Slippman
2000 5.98% -9.11% 17.51% 11.80% 4.33%
2001 5.32% -11.88% -0.60% 6.54% 0.02%
2002 2.17% -22.10% -14.51% -14.63% -1.39%
2003 1.32% 28.68% 35.62% 38.79% 15.91%
2004 1.29% 10.88% 16.48% 22.65% 11.76%
2005 2.79% 4.91% 12.56% 7.68% 6.28%
2006 4.38% 15.79% 10.32% 15.12% 13.23%
2007 1.00% 5.49% 7.98% -0.30% 2.30%


Sharpe Ratios 2000-2007
SP500 MD400 SC600 Slippman
-1 51 49 49

- quote -

All of my stock and cash equivalent investments are in Roth or Conventional
IRA's, so I have not looked into methods of minimizing the tax burden on
the returns.
--ron

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On Tue, 29 Apr 2008 04:04:03 -0500, "Walter_Slipperman"
<WalterS[at]nospam.com> wrote:

- quote -

That sounds appropriate, and is what I would expect. Again, with the
caveat that your advisor is not counting your contributions as gains (which
he should NOT be).

My conclusions are the same.
--ron

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Thanks for the reality check so far.

I also would like some of your thoughts on the volatility of this portfolio.
I went back to a quarterly billing statement from last year where the fee
was based on the value of the account on October 17th 2007.

The account on Friday, April 24th, of last week when I asked him to give me
some numbers, is worth 0.968 of the value it was worth on October 17th
2007. It lost about 3%.

Looking at a graph of the SP500 I see that it closed at 1541 on October 17,
and bouncing between 1380 and 1400 during last Friday when he gave me the
current results of the portfolio. If we say 1390/1541 it appears that the
SP500 was down more by a factor of 0.902. So it appears that the portfolio
is less volatile than the SP500.

And then there taxes. I know I paid a lot of taxes last year and maybe if
that was being deducted from the portfolio things wouldn't look anywhere
near as decent.

Once again, thank you for the comments. It has made me feel a bit better
about paying the fp his fee.

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- quote -


Portfolio Internal Rate of Return - This is the result of the calculation
to solve for the rate of return which would make an account grow from its
initial
value to its ending value over a particular period of time. It measures
portfolio
growth over time and is directly comparable to other familiar returns such
as that of a bank account.

\Walter

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Sounds like an accurate rate to me.

Unforutnately the current financial philosophy is that everyone
should now be wholely responsible for their retirement, medical,
housing, college etc. They should save and invest for these,
with some tax incentatives from Wahsington.
Many of the investment calculators still use 8-12% annual return
figures.
Parts of the 1980s and 1990s were this good, but the 21st century
is not shaping up as well.

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"Walter_Slipperman" <WalterS[at]nospam.com> writes:

- quote -

Hard to say, but the raw numbers look quite good.
Some basis for comparison: in 2002, the S&P500
took a nosedive down by 22%. You hardly got
touched. in 2003, the S&P500 shot up by about
30% - you captured half of that upside. Your
overall average over that period of time was
quite a bit better than an S&P500 index fund.
At a quick guess, you could probably have gotten
very close to the same performance with a simple
portfolio made up of half a total-market index
and half an investment-grade short to mid-term
bond fund. Which, actually, is a remarkably
decent portfolio. (The 50/50 portfolio I just
described, implemented using Vanguard retail
funds, rebalanced on Dec 31 each year, gets
you an average return from 99-07 of 5.06%, with
a 7.43% loss in '02 and losses of about a
percent each in '00 and '01 -- way way tamer
than the total market alone - and also slightly
better returns during that period - the total
stock market fund averaged 4.5% over those 9 years).

- quote -

I just ran the numbers above (the two-fund, once/yr
rebalanced portfolio) by copying a few numbers off
of the Vanguard website into a spreadsheet. That help?



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On 2008-04-26 16:57:02 -0700, "Walter_Slipperman" <WalterS[at]nospam.com> said:

- quote -

Keep in mind one thing that almost everybody here accepts as an axiom:
Past performance is no guarantee of future success! So your advisor's
performance over the last 9 years is no guarantee of similar
performance over the next 9 years.

Personally I would pay somebody 1% to manage my finances when hell
freezes over.

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On Sun, 27 Apr 2008 11:45:49 -0500, "Walter_Slipperman"
<WalterS[at]nospam.com> wrote:

- quote -

1. Clearly the 6.62% represents an annualized return, as I suspected, and
not a "total" return.

2. I don't know what "maek" means and don't understand that sentence.
There's probably a typo in that sentence, and maybe a missing word or
phrase, too.

3. Unless he is including your contributions as part of the growth, as I
wrote before, these results are much better than that of the S&P500 Total
REturn index, and with less volatility.

4. Your results are not as good as the S&P MidCap 400 and SmallCap 600
Total return indices but, again, the volatility of your returns is much
better, in keeping with your desire for a more conservative position.
--ron

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Walter_Slipperman wrote:

- quote -

Yes, this is good. It means you got 6.62% per year, had your annual
returns all been exactly the same.
Joe

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Here is what the page looks like that he sends me:
__________________________________________________ _____________________
Portfolio Internal Rate of Return

Annualized Portfolio Return from 08/16/99 to
04/24/08 = 6.62%

Portfolio Internal Rate of Return - This is the result of the calculation
to solve for the rate of return which would maek an account from its intial
value to its ending over a particular period of time. It measures portfolio
growth over time and is directly comparable to other familiar returns such
as that of a bank account.
__________________________________________________ _____________________

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On Sat, 26 Apr 2008 18:57:02 -0500, "Walter_Slipperman"
<WalterS[at]nospam.com> wrote:

- quote -

Assuming he is calculating those numbers correctly, I'd say you're doing
very well. Also, based on the numbers you've posted, I would guess that
the 6.62% is not an "overall" return but rather an annualized return (6.62%
per year).

Here is a comparison with the S&P 500 Total Return figures during that time
frame. The Total Return figures includ reinvestment of dividends. I only
have month-end figures, so the S&P 500 TR numbers only go through
3/31/2008:

Walter S&P500 TR
Aug 99 to Dec 99 17.34% 11.18%
2000 4.33% -9.11%
2001 0.02% -11.88%
2002 -1.39% -22.10%
2003 15.91% 28.68%
2004 11.76% 10.88%
2005 6.28% 4.91%
2006 13.23% 15.79%
2007 2.30% 5.49%
1/1/2008 - 3/31/2008 -9.44%

Overall, the S&P500 TR index, from 8/1/1999-3/31/2008 showed a total return
of 14.87% (and an annualized return of 1.61%)

According to the numbers you've posted, your total return from 8/1/1999 to
12/31/2007 is 92.6% with an annualized return of 8.09%. You only had one
losing year, compared with three losing years for the S&P500 TR.

In addition, your volatility, calculated as the standard deviation of your
returns, is less than that of the S&P 500. So it appears as if he has
brought you better returns than the S&P500 TR Index with less risk.

I would say this return is well worth his fee. Your returns, before taxes,
were 3-4 times that of the S&P500, over a similar time frame.
--ron

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On Apr 26, 4:57*pm, "Walter_Slipperman" <Walt...[at]nospam.com> wrote:
- quote -


Not too bad for a "conservative" investment approach.


======================================= MODERATOR'S COMMENT:
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Walter_Slipperman wrote:

- quote -

I looked up the returns of the S&P at
http://www.moneychimp.com/features/market_cagr.htm
and added them above for the full years (note these returns seem to
ignore dividends). At first blush, I'd say he's doing his job. He
avoided the 40% loss most of us had in 2000-2002, and still had decent
returns in the years since.
I don't know how he has you invested so you saw such returns, reward
follows risk, and conservative usually means a lower portion of stocks,
which tends to lower overall returns. I'd be happy with the returns he
showed you.
Joe

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My wife and I started with a financial planner back in August of 1999. In
filling out a form about our investment goals and tolerance for risk we came
to the conclusion that we were more comfortable on the less risky side and
decided that our investment plan would be pretty conservative. He reviewed
our investments and made a lot of changes that were a good thing when the
market started to go south in the following year. He also got us into bonds
(something I'd been adverse to) where they did well with interest rates
dropping in the years that followed.

Over the years we have made some 401K contributions to the fund and my wife
also moved an IRA rollover in to the portfolio covered by the financial
planner. The financial planner's software reports an internal rate of
return and is calculated after he has taken his 1% fee.

Here is what he reported to us:
Aug 99 to Dec 99 = 17.34%
2000 = 4.33%
2001 = 0.02%
2002 = -1.39%
2003 = 15.91%
2004 = 11.76%
2005 = 6.28%
2006 = 13.23%
2007 = 2.30%

Overall return from 08/16/99 to 04/24/08 is 6.62%.

This does not take into account the taxes that I had to pay when mutual
funds reported capital gains, so the return is even lower. I did not pull
money from the portfolio to pay those taxes, instead paying them from
another savings account.

Is this a reasonably well managed portolio over this time period? I am
aware that I asked him to invest this somewhat conservatively so does this
seem about right?

I just don't know if the performance of the portfolio is particularly good
and whether it is worth paying him the 1% per year for his performance.
Where can I check numbers to see what a pretty conservative portfolio should
have done in the period from August 1999 to the present?

\Walter

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