Live investing is completely different from casual investment theorizing.
Yesterday I noted that the “Gone Fishin’ Portfolio” underperformed the S&P 500 by 21.48% in 2013.
What about longer term numbers?
Here are the 3 year returns:
Gone Fishin’ Portfolio 6.88%
S&P 500 16.18%
Difference -9.30% per year
And 5 year returns:
Gone Fishin’ Portfolio 13.90%
S&P 500 17.94%
Difference -4.04% per year
On their website, the Gone Fishin’ people claim the portfolio is 10 years old, and they tout its 10 year record. The problem is that the book was published in June of 2010. Once you use “live” investment dollars – or once you officially publish a strategy – it often starts tanking.
The reason is survivorship bias. People theorize about a lot of investment ideas. The ideas that “do well” on paper get all the attention. Finally real dollars are put to work, but this happens too late in the game. Families get caught in what did well over the past 10 years – not what will do well in the future.
On a side note, after writing this post on “live” investing I can’t stop thinking about Bill O’Reilly’s “We’ll do it live!” flip-out.