Hi Clive, Re: Performance enhancement.....................
In the article mentioned by AIMster this AM one of the most important parts was a simple statement that avoiding underperformance in the short term is key to achieving long term outperformance.
I find this true in my own account many time. If the market drops significantly and my management model keeps my losses smaller, then I don't have to 'outperform' to such a great degree on the next uptick. Maintaining the relative lead through the next swing of the pendulum builds the long term outperformance.
Looking at one graphic should give an idea of how this works:
The lowered asset value decline during the 2002-2003 decline allowed the account to be in better shape going forward. Mild underperformance through 2006 and up to the market peak in 2007 still left the account leading the NASDAQ Composite. The more mixed decline during late 2007 through do date affected both accounts but should let the managed account again possibly maintain or out perform going forward.
As the cash cushion rebuilds the account will, on the short term, probably start to lag the index again. However, that will also probably coincide with another market top. That will again keep the account's decline lower than the index's.
So it seems it's a matter of maintaining the lead and adding slowly to it over time. A small performance enhancement during market declines can achieve larger long term rewards.
Best regards, Tom
In the article mentioned by AIMster this AM one of the most important parts was a simple statement that avoiding underperformance in the short term is key to achieving long term outperformance.
I find this true in my own account many time. If the market drops significantly and my management model keeps my losses smaller, then I don't have to 'outperform' to such a great degree on the next uptick. Maintaining the relative lead through the next swing of the pendulum builds the long term outperformance.
Looking at one graphic should give an idea of how this works:
The lowered asset value decline during the 2002-2003 decline allowed the account to be in better shape going forward. Mild underperformance through 2006 and up to the market peak in 2007 still left the account leading the NASDAQ Composite. The more mixed decline during late 2007 through do date affected both accounts but should let the managed account again possibly maintain or out perform going forward.
As the cash cushion rebuilds the account will, on the short term, probably start to lag the index again. However, that will also probably coincide with another market top. That will again keep the account's decline lower than the index's.
So it seems it's a matter of maintaining the lead and adding slowly to it over time. A small performance enhancement during market declines can achieve larger long term rewards.
Best regards, Tom
Port Washington, WI 53074
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