How would God's portfolio perform?
Investors may be worrying about their current returns, but even if you had the best possible portfolio it is impossible to avoid drawdowns.
Speaking recently to Good Returns TV, I discussed how this shows that it is impossible to avoid periods of negative returns.
I discussed how the best possible portfolio, God’s Portfolio, performed over 90 years using research conducted by US firm Alpha Architect.
The portfolio is made up of the 50 best-performing stocks and is rebalanced each year with stocks which will perform best over that time. This portfolio is tracked against the S&P500.
Being a passive investor and holding the S&P500 for 90 years did pretty well. One dollar invested at the start would turn into $50,000.
But God did significantly better turning $1 into $12 billion over the 90-year timeframe. That is annualised return of 29% per annum.
But it was not a smooth ride, with big drawdowns and some even worse than the index.
The message for advisers and investors is that we will get through these drawdowns. Don’t look at short term performance when assessing managers, it is long-term performance that counts.
To find out more about how God’s Portfolio performed watch the full interview on Good Returns TV.
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Stephen has over 25 yrs investment experience & co-founded Castle Point, a NZ boutique fund manager, in 2013. Prior to that he worked at funds management companies in Auckland, London & Edinburgh. Castle Point WINNER FundSource Boutique Manager 2019