Last post I described a change to the Slack Method for managing Index funds. Index “whole market” funds are just a small part of my share portfolio – about 3%. The bulk of my share market exposure is in individual growth companies.
Slack Investor is a great believer in measurement and is most un-Slack when it comes to record keeping and recording his investment results.
If you can not measure it, you can not improve it
Attributed to Lord Kelvin … his more verbose quote is here
My main cycle of measurement is at the end of the tax year in Australia, June 30. Because the results of one-year performance can be a bit misleading. I am much more focused on results over 5 years as these longer term measures are more meaningful to the investor. The benchmarks I have used have been mainly sourced from the excellent NetActuary site. A shout out to the low cost Vanguard Growth Index Fund. When I tire of investing in individual companies, this (or Vanguard ETF’s) is the type of vehicle that would be a good resting place for funds that require minimal supervision.
A good way of measuring growth is comparing $10000 invested in the Slack Fund in the 9 years since 2009 against benchmarks.
The SLACK FUND growth of $10000 invested October 2009 vs BENCHMARKS. The Median Balanced Fund, Vanguard Growth Fund, ASX 200 Accumulation Index, Residential Property median in both Brisbane and Melbourne, and Cash (Online bank Interest) and Consumer Price Index (CPI)
Year by year results are presented in table form below. I will add results at the end of each financial year and put them on The Slack Way page.
| YEAR | SLACK FUND | MEDIAN BAL | VGARD GROWTH | ASX200Acc | RES BRIS | RES MELB | CASH | CPI |
|---|---|---|---|---|---|---|---|---|
| 2010 | 6.6 | 9.8 | 12.3 | 13.1 | 8.5 | 24.3 | 4.2 | 3.1 |
| 2011 | 2.5 | 8.7 | 9.1 | 11.7 | -3.6 | -2.0 | 4.4 | 3.7 |
| 2012 | 8.3 | 0.4 | 1.3 | -6.7 | -2.7 | -4.8 | 4.3 | 1.2 |
| 2013 | 26.5 | 14.7 | 18.6 | 22.8 | 3.7 | 3.3 | 3.2 | 2.4 |
| 2014 | 23.6 | 12.7 | 14.5 | 17.4 | 6.8 | 9.3 | 2.6 | 3.0 |
| 2015 | 2.4 | 9.6 | 11.8 | 5.7 | 3.4 | 7.8 | 2.5 | 1.5 |
| 2016 | 14.2 | 2.8 | 4.2 | 0.6 | 4.9 | 8.2 | 2.2 | 1.3 |
| 2017 | 19.5 | 10.4 | 8.8 | 14.1 | 3.0 | 13.8 | 1.9 | 1.9 |
| 2018 | 37.6 | 9.2 | 10.0 | 13.0 | 1.1 | 2.3 | 1.8 | 2.1 |
For this site I have only presented my share trading results since 2009. Any cherry-picking of data to avoid the terrible investing years of 2008 and 2009 is coincidental. Out of the ashes of the Global Financial Crisis (Great Recession), 2009 is the year that I started my Self Managed Super Fund (SMSF Slack Fund) and from which I have independently audited results. For the record, prior to 2012, I was not what I regard as a very successful investor. My investments for the 2003-2011 period performed worse than the Median Balanced fund on 6 out of 9 occasions.
What changed? I started to go to a local investment class which made me re-evaluate my investment method (Thanks Robbie Fuller!)
- Took a more disciplined approach to investing by documenting everything and having weekly and monthly and yearly chart reviews of my investments
- Tried to reduce confirmation bias from my portfolio – i.e. I bought this stock for a good reason … I am smart … the price has gone down … the market must be wrong! – I would score myself 5/10 on this goal!
- Started using charts and stop losses extensively.
- Started investing mostly in growth companies that have some barriers to entry for competitors (moats) – Companies with manageable debt, with future PE less than 25 -30, and with a return on equity (ROE) of >15%
- Before investing in an individual company use both fundamental analysis (Thanks Market Screener) and technical (chart) analysis (Thanks Incredible Charts) before I make a buy order.
- Tried to follow the Peter Lynch approach to my portfolio. Selling the bad performers (weeds) and trying to add to my position on stocks that are doing well (flowers).
You won’t improve results by pulling out the flowers and watering the weeds.
Legendary Investor Peter Lynch from quoteswise.com
Investing in growth companies can have its despairing moments and I cannot guarantee that the Slack Fund will continue to outperform the benchmarks … but, the results, so far, are good.
Discover more from Slack Investor
Subscribe to get the latest posts sent to your email.
Hey Slack investor, great results over the past 5 years! I can only hope to replicate something like this with my Fully Franked Fund, which is so far lagging behind the benchmarks…
Love some of the changes you outlined, especially confirmation bias – I find that one of the hardest to avoid, as well as adding to the flowers instead of the weeds – very hard to do as a value focused investor!
Cheers, Frankie
Thanks Frankie for your comment. Although the Slack recent results are very good – to anyone who asks me, I tell them that “Investing is Hard”. There are many false starts and disappointments along the way. For a long time I struggled to beat benchmarks – The most critical change I made was starting to invest in (high ROE) growth companies. Yes … there are a lot of weeds, my “winning ratio” is less than 50%. But, if you persevere, weed, and have a little luck, companies like Altium (ALU) and Appen (APX) will be the type of investments that are maintained in your portfolio. Adding to the “flowers” is difficult but essential. If you are convinced about a company and they have a dip in share price, wait till the price starts to increase again – and then buy some more!