OT More TMF
For a $5000 investor, commissions would average less than 1% of the portfolio value.
In E*Trade money, that's $59.80 vs.$14.95 for an ETF. That compounds into money over time. Plus taxes taking a bite of your gains that isn't compounding.
Mechanical Scenario:
Let's say I have $5,000 in E*Trade.
I buy my four stocks. $5000-$59.80 = $ 4940.20
One year passes and both market and F4 go up 9% Balance= $5384.82
Then comes switcheroo time.
First I pay taxes: $ 444.62 * 28% = 124.49 Balance= $5260.33
Then I pay more commissions: $5260.33-$59.80 =$5200.53
So I'm up 4.01% going into the second inning.
Index scenario:
If I bought SPY at today's close of $130.0313, I'd have
38 shares ($4941.19 value) plus $46.86 for a total value of $4985.05
One year passes and both market and F4 go up 9%
Typically SPY under-performs by .2%, so $4941.19 + 8.8% = $5376.01
That $46.16 collects 5% money market, so $46.16 + 5% = $48.47
Total balance (5376.01+48.47) = $5424.48
Now I pay taxes: 2.31 *.28 = $0.65 Balance=$5423.83
So I'm up 8.48% going into the second inning.
We need more investors crusading for such models of public disclosure and accurate accounting.
I agree totally. This creates a weird situation for TMF, of course. They set themselves up as anti-gurus, complete with some of the best-written disclaimers I've ever seen. Yet people want gurus anyway and choose not to do their own homework. Of course, if you take the "Don't Mimic Us" claim literally, the Foolish Four is pointless since nobody is supposed to use it.
Thing is that Rule Breaker/Rule Maker is simply their version of the value/growth dichotomy. Over time, I expect both to do fine.
[I said that "Part of the problem was that TMF borrowed the mutual funds' trick of boasting high performance over statistically insignificant time periods."]
Boasting? Please provide even the smallest evidence of that.
Remember this?
images.amazon.com
How about:
"In sixteen months of directing The Motley Fool on America Online, the most active online financial site on the planet, David and Tom Gardner have managed a real-money portfolio that has, to date, risen more than 140%. What was $50,000 on August 4, 1994, has grown into over $120,000 today."
(If the intent is to "minimize commission and opportunity costs" for the long term, why does this matter?)
And
"Since going on-line in August 1994 with their sassy and savvy Web site, the Motley Fool, the Gardner brothers have been helping the on-line investor crush the market averages by dozens of percentage points."
amazon.com
And comparing that portfolio with mutual funds "tricks" is unfounded.
My point was the use of short-term performance over statistically insignificant time periods. Don't get me wrong. I like The Motley Fool. The good outweighs the bad. Still, they were sending mixed signals. |
