Gaffer's Portfolio 

May 28, 2010

One good thing about investing with a system is that you can sit back and relax while everyone else is in a tizzy. May certainly has stirred up a hornet's nest among the high-priced analysts and commentators. About half seem to think we are headed into a double dip recession. The other half suggest we are going through a merely normal correction.

I agree with the second camp. A 10% to 15% correction is perfectly normal given where the market has come from in the past 14 months. The timing is about right, too. My belief is that we have seen the worst, but that's just a hunch and not based on the disciplined approach Gaffer teaches. It would not be a surprise to me if we stay fairly flat for the next two or three months. 

I talk about this and its causes in the companion blog post at http://lunchwithgaffer.com/portfolio. You might want to take a look and comment. I also ask in that post what investment challenges you would like to see fixed. I am looking for ideas about how I can be more useful to you. This is your chance to tell me. 

The reason for the portfolio was to prove or disprove the validity of the teachings in The Gaffer Wealth System. It began during two rough months at the end of the recession but this is the first true correction to put it to the test. So far, it is doing what it was designed to do: give a slightly better return than the S&P 500 Index. 

That index has a long-term average of between 10% and 11% with dividends reinvested. If the strategies Gaffer espouses can get you 12% to 14% long term and with a good degree of safety they will have done what they were supposed to do.