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Investment Objectives

September 24th, 2009 Posted by Stocks No Comment yet

Investing Principles and Methods Series, September 24, 2009.

I have a friend who always asks, “What is your objective?”  What do you want to achieve in your investment goal?  There are many objectives or motivations for you to join me in this investment series.  What is it?  My goal in investment isn’t unique; it is to earn a 15 percent annual compound return on my capital.

What are some of the professional money managers earning on their investment (capital)?  I ran a search using Scottrades’ database on mutual funds. Out of 10,878 funds, the best performer for the past 5 years is currently a fund ran by “T Rowe Price Int: Lat” PRLAX with 28.51 % annual average return.  How many of the 10,878 funds achieve more than 15% average annual return? The number is 105, less than 1% of the total funds population. That means 10,680 funds, representing 98% of the population, delivered an annual average return of less than 15% over the past 5 years.   Of that, 6366 funds (56% of population) earned less than 5 percent with the rest somewhere between 6 and 15 percent.

Perhaps we need to check out what the returns are for the Dow if we invested 5 years ago– from September 2009 the month end closing was at 9,748 and if we go back 5 years, on September 2004, it was at 10,080. If we had invested in 2004, we would have made a loss as of September 2009.  As you can see, if we observed the performance in isolation without comparing them to other opportunities it would have been difficult to have a proper perspective.  In our list of funds, the top 107 all beat the Dow substantially.  Not bad at all.

My goal is earn 15 percent or be among the top 1 percent of the professional money manager/ mutual funds. What is your goal?  I am not a fortune teller.  I could only do what I know.  So far I am satisfied not because it is a success but that I have done my best.  Happy investing to you!

PS: You will find very little uniqueness or original ideas coming from me.  Most if not all, came from Benjamin Graham.  The rest perhaps came from Warren Buffett.  Whatever errors you find– that comes from me – perhaps in my interpretations and applications of the principles.

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