Gaffer's Portfolio 

June 30, 2010

I had made the decision this was to be the final portfolio entry. I have been run off my feet in recent months and it is taking a toll. (You can find out why from my June 30 blog. Oh, and you can pick up Gaffer for free.)

But then the market continued its May decline, as expected. It has been bouncing around in a range of a few hundred points and will probably continue that way for another month or two. So I thought I'd better stick it out until that pain is over – not that I think there is much more pain to come, just a requirement for patience during the correction.

But who knows? That's merely a guessing game.

As we have seen over the past 19 months, Gaffer's system is not about guesses, and it does not cause heart palpitations either. It is a solid, steady type of investment program for those saving for retirement and not needing undue excitement while they do so.

The portfolio has now, I think, proved its point. It was hoped that it would show a slightly better performance that the S&P 500. As you know, the index has averaged between 10% and 11% since before the Great Depression. I hoped you would have 12% to 14% over time, and that seems to be in the cards.

Well the portfolio has proved it can outperform the index. Some months it fares a little more poorly, sometimes it doesn't. I plugged in a new number to the results this month; I don't know why I didn't think of it before. There are now annualized rates of return for both the index and the portfolio. We can compare apples with apples. Since the close of business December 31, 2008, the average annual rate of return for the index has been 8.8%; for the portfolio is has been 11.1%.

That period included last year's painful January and February and the correction of the past two months. Approximately as forecast, the portfolio has outstripped the index by 2.3%. That may not sound very much, but look what happens with $10,000 invested at either of these rates of return after 10 years.

There's more than a $5,000 difference to the bottom line. Because of compounding, the difference widens the further out you take the numbers. The point I have been trying to make all along is that you could outstrip the S&P 500 by yourself, without any outside help. You can learn to be independent of advisors and their fees and commissions; you can learn to stand solidly and proudly on your own feet…and I hope you will.

These monthly updates will come to an end soon. I think they have served their purpose. I will keep the blog going for a while but it will start to serve another purpose. You may be interested in what goes on there for a while. But I'll see you through this correction before I quit updating this portfolio, a task that takes several hours.

Until next month!