Thursday, March 12, 2009

Marketocracy Portfolio Updated, Beating S&P500 By 10 Percentage Points



My portfolio was started on 1st August 2008. Marketocracy lets you manage a virtual portfolio of $1M in a simulated trading environment, allowing you to track your performance accurately and compare your fund management skills to other investors and professional fund managers. Yes, they do take into account transaction cost as well. If your track record turns out to be one of the best, you could be hired to help manage a real fund at Marketocracy. It's a great place to learn, and a great place to prove your talent. They also have important rules to ensure that you are running an actual investing portfolio and not just sitting on cash:
  • No position can exceed 25% of your total portfolio value.
  • Half your portfolio must be comprised of positions under 10% each.
  • Your cash position isn't limited by this guideline, although you must be 65% invested
My fund was smartly called SMF, or Salvador Mutual Fund (no, not the foul language acronyms you are thinking). So far so good, although the first couple of months was iffy. SMF fund performance in orange colour.

The main objective of the fund is to beat the S&P 500. For the past 6 months, the S&P 500 has lost 41.5% while my fund has lost just 31.4%. I know its silly to highlight since the fund is still losing money, but thats the quirkiness and beauty of fund management. If you are managing for pension funds, there are usually rules which dictate that you must be at least 60% or 80% invested at all time, and your aim is to beat the index - not to give positive returns or better prevailing interest rate by 300 basis points, but to beat the index. If you can consistently beat the index, you should be golden.

Hence to beat the S&P 500 by 10% over 6 months is a decent thing. I should really try to get back to the buy side... any offers!!??





[download spreadsheet]

graph of fund vs. market indexes


recent returns right curve


RETURNS
Last Week 4.01%
Last Month -13.04%
Last 3 Months -6.18%
Last 6 Months -31.47%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -36.89%
(Annualized) -51.83%
S&P500 RETURNS
Last Week 1.28%
Last Month -16.76%
Last 3 Months -16.76%
Last 6 Months -41.49%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception -41.55%
(Annualized) -57.35%







RETURNS VS S&P500
Last Week 2.73%
Last Month 3.71%
Last 3 Months 10.57%
Last 6 Months 10.01%
Last 12 Months N/A
Last 2 Years N/A
Last 3 Years N/A
Last 5 Years N/A
Since Inception 4.66%
(Annualized) 5.52%



left curve alpha/beta vs. S&P500 right curve


Alpha 16.03%
Beta 1.04
R-Squared 0.81



left curve turnover right curve


Last Month 37.48%
Last 3 Months 53.71%
Last 6 Months 69.00%





ACTG $2.85 9.80%
BAC $4.93 7.81%
C $1.54 5.03%
DRYS $4.18 14.18%
EWJ $7.24 9.18%
FXI $25.10 7.96%
GCH $7.18 3.41%
NFX $20.80 8.24%
V $51.37 8.14%
YHOO $13.39 10.40%

p/s photos: Andrea Fonseka

6 comments:

Nostradamus said...

Go long on Tech Stocks selling business and home software. I believe this sector will be inflation proof, commodity proof and the biggest capital required is only the human brain and should recover the fastest on rebound.
Food, Entertainment, Communications, Energy and Information Technology will be needed whether it is a recession or deflation. All the best.

Jasonred79 said...

Those who were shorting financial stocks are UP by 30%, easily... so being -30% is not such a great achievement... Though I don't know if those rules allow that.

Anyhow, I'm pretty sure you're out of the running to win this thing... the leaderboard are definitely all showing strong gains.

Salvatore_Dali said...

jason,

i am not running the fund as a hedge thing... i am trying to be near fully invested and still beat the S&P500...

yes, you may notch gains of 20% or even 30% when the index is down 40% but that would have involved huge stock or sector bets, e.g. shorting financials ETF etc... thats one way to run a fund

i am using the fund to match wits with the S&P500, not looking at absolute returns per se... if I was, I would be all cashed up from August till now... 0% would have beaten the mkts by 41% but that would have been senseless.

ikanair said...

Muahahahahahahahahahahha
It's this what it have become of?
To lose less is to be considered good?

No wait.... wait...

The (un)holy trinity (subprime, us consumer and china) is playing out right.

Then maybe you will just lose 80% and S&P lose 90%, and you are still good. any may they give you a million dollar fund manager job.

hoocoodanode?

Salvatore_Dali said...

ikan,

u can laugh but thats portfolio mgmt... ask any fund manager... u just have to beat the index, u r judged by being fully invested... i told u its quirky but thats the way the dice rolls...

if the index is down 10%, for you to make +40%, you would have to shy away completely from a balanced portfolio... you would have had to make huge sector or stock bets, e.g. put 70% in KNM...

I am not saying that is wrong, that is a genuine stock picker model, if u can do that well, go be a hedge fund guy... but if you r managing a proper portfolio using modern portfolio theory, you basically aim to beat the index, based on the premise that:
over the long run stocks offer superior returns (we now know how silly that assumption is)
hence if you consistently beat the index, over the long run, you should have superior returns (we also know that is not entirely true)

we can laugh at modern portfolio theory n ask them to chuck the textbooks... thats like telling you son not to get business degrees cos they teach u shit... but you still send yr kids to college cause thats the way things are done...

2u said...

nice blog..
i like this information..
hope you will excelence..

All The Best.
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