Some things take time. One of them is creating a verifiable track record for Rule #1 Investing strategy. Now we have the data in from the independent research website AAII.com, aka American Association of Independent Investors, and the news is good. Or as Zig Ziglar used to say, 'Better than good'. Rule #1 Investing is #6 of 77 for 2013 and #7 of 77 for 2008-2012
After I wrote Rule #1, AAII reached out to get my input on their project to computerize the selection of stocks for their Rule #1 virtual portfolio.
We’ve done rather well. There are 77 different strategies they follow so the Rule #1 portfolio stands not only on its own results but also in comparison to quite a range of other ‘guru’ strategies. Not only did the portfolio crush the S&P 500, it crushed the competition as well. The Rule #1 Investing portfolio is sitting in 6th place out of 77 for 2013 ROI of 25.9% with the S&P at 12% and 7th out of 77 for the 5 year ROI of 20% with the S&P at 4%.
What this means in practical terms is that Rule #1 strategy is so robust you can even take out the arrows and it does quite well. And it means that $100,000 invested in 2008 would now be worth about $250,000. And $100,000 invested in January this year would now be worth about $130,000.
Here’s the data:
This picture shows Rule #1 ROI for 2013 and its corresponding 6th place.
This shot shows Rule #1 strategy is in 7th place overall of 77 different strategies and up 20% from 2008-2012 while the S&P 500 is up 4% in that time.
So should you just sign up for AAII and buy the stock it finds. You could but you’d be violating a fundamental tenet of Rule #1 – Meaning. You’d have to do a lot of studying to keep up with stocks that come in from so many industry groups. Also a lot of the stocks are technology. And the beta of the portfolio is about 170 – significantly more volatile than the S&P even while beating the pants off it.
Still, its a heck of a tool, no? I’m thinking of setting up a screen like this except a bit more sophisticated and back test it. If it hits solid singles I’ll start posting up the results monthly if you are interested. Let me know.
Now go play