The Gone Fishin’ Portfolio: The Best Low-Cost, Tax-Efficient Investment System

by Alexander Green, Advisory Panelist
Friday, July 31, 2009: Issue #1055

Seven years ago, I created The Gone Fishin’ Portfolio for The Oxford Club.

The goal was to develop a low-cost, tax-efficient investment system based on the only strategy to ever win the Nobel Prize in Economics.

The portfolio has generated high returns with low risk while doing a complete end run around Wall Street’s high-priced products, self-serving advice and mountain of fees. Yet it is so simple to implement that you can do it yourself in less than 20 minutes a year.

Still, a lot of investors just don’t get it.

A prime example is a Mr. Talmadge O’Neill. Posting a customer review of my book “The Gone Fishin’ Portfolio” on Amazon, he writes that the portfolio “is only going to give you the basic market return. Nothing fancy. We’re not talking endowment returns.”

It’s true that the portfolio is nothing fancy. But he couldn’t be more wrong about the returns…

The Gone Fishin’ Portfolio Beats The S&P 500 Each Year

With far less risk than being fully invested in stocks, The Gone Fishin’ Portfolio has beaten the S&P 500 each year, gaining more than the market when it was up and declining less when it was down – even though the strategy requires no economic forecasting or market timing.

We even back-tested the portfolio through the previous bear market and back to January 1, 1998. (We can’t go back before then because one investment in the portfolio – inflation-adjusted Treasuries – were only created by the U.S. government in 1997.)

The annual results can be verified easily and independently. The Gone Fishin’ Portfolio has beaten the market, not just over the entire period but every year.

Is there any guarantee that this will continue to be the case in the future? Of course not. No strategy could possibly guarantee that.

Yet I know no other investment system that offers a higher probability of long-term investment success.

As for the Ivy League endowments, The Gone Fishin’ Portfolio has left them in the dust lately, too. And for one simple reason…

As Barron’s wrote recently, “For years, top university endowments at Harvard, Yale and Princeton were the envy of the investment world, thanks to the outsized returns they generated from significant investments in nontraditional assets such as private equity, real estate, hedge funds and commodities, and low exposure to U.S. stocks and bonds.”

• Yet now the Harvard and Princeton endowments are down 30% for the fiscal year ended June 30, while Yale’s is down approximately 25%.
• What’s more, their real-world returns are probably much worse. Why? Many of their investments are in illiquid assets whose “estimated values” may not reflect today’s steeply discounted market prices.
• Yale and Princeton both have roughly half their endowment assets in these types of investments. Without a liquid market, it’s virtually impossible to value their portfolios accurately, especially in this market.

The Gone Fishin’ Portfolio Never Strays Into Illiquid Assets

However, The Gone Fishin’ Portfolio never strayed into illiquid assets like these. Although it is designed to generate superior long-term capital appreciation, there is nothing in the portfolio that can’t be liquidated at the close of any business day.

And while the market has had its ups and downs this year, The Gone Fishin’ Portfolio has gone on doing what it does best: In the first half of 2009, the S&P 500 declined 1.5%. The Gone Fishin’ Portfolio rose 11.3%.

We’re on track for yet another record year.

So, no, The Gone Fishin’ Portfolio hasn’t generated endowment-type returns lately.

But we can all be grateful for that.

Good investing,

Alex

P.S. Get a free copy of “The Gone Fishin’ Portfolio” with a new Oxford Club subscription. Or read more about The Gone Fishin’ Portfolio.

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