Returns for week ending 8/27/10

Model portfolio, hypothetical returns for past…
1 week: -1.2%

Value of $10,000 invested at inception in 2003: $52,130

Returns for week ending 8/20/10

Model portfolio, hypothetical returns for past…
1 week: +2.6%

Value of $10,000 invested at inception in 2003: $52,765

note from Steve re: model portfolio's recent performance

In the 16 weeks since I wrote my April note to you, I'm encouraged that the model portfolio has begun to perform more in line with its design goals and past performance. While overall returns are a quite moderate 2.1%, or 6.3% annualized, it has significantly outperformed its market benchmark.

This can be attributed to two key factors... 1) The model portfolio's engine (the 10-stock portfolio) has outperformed the market, generating "alpha", and 2) The model portfolio's hedge position (TWM) has profited from the market's recent decline. For those of you using the FolioInvesting platform, this performance data is readily available via chart by entering a "start date" of 4/23/10.

S&P 500 Index: -10.7%
Model Portfolio: +2.1% (hypothetical)

... resulting in model porfolio returns that are nearly 13% better than the market over the past 16 weeks. Annualized, this amounts to +38% "outperformance", which is close to the model's historical performance over the past 7 years.

Of course, past performance is no guarantee of future returns! And your actual results will vary based on timing of your actual trades, and/or your portfolio's position sizes.

Since my April note, the position size in my managed portfolios has been approximately 1/2 that of the model portfolio's, so my actual gains are about 1/2 that shown above. I do intend to keep my position size at current levels until the model portfolio is showing solid gains over both the 13-week (one quarter) and 26-week (6 months) timeframes. I'll inform you here in advance when I decide to increase my position size to match the model's. Stay posted!

Returns for week ending 8/13/10

Model portfolio, hypothetical returns for past…
1 week: +1.9%

Value of $10,000 invested at inception in 2003: $51,447

Returns for week ending 8/6/10

Model portfolio, hypothetical returns for past…
1 week: +3.3%

Value of $10,000 invested at inception in 2003: $50,484

Returns for week ending 7/30/10

Model portfolio, hypothetical returns for past…
1 week: -0.8%

Value of $10,000 invested at inception in 2003: $48,850