Here's our most recent look at the performance of this very successful momentum investment strategy.
Our massively sucessful, but very volatile, Bonkers Portfolio. Even if it's not to your taste, there are two essential lessons for all investors, in funds or otherwise.
Quick recap
All of our Dynamic portfolios are based on a momentum philosophy (buying the best performing funds on the basis that they will probably continue to outperform for a defined period). This is well documented and has been incredibly successful, as proven by research stretching back decades and our own unique and ground-breaking research.
In the Bonkers Portfolio we took our Dynamic approach and simply bought the best performing single fund from the whole available universe of funds. As you can see from the table below, the returns are incredibly impressive but the increased risk will not be to everyone's taste.
The outperformance…
The track record for this strategy goes back to January 1995, buying the best performing fund over the previous 6 months, which was BlackRock Gold & General fund. Six months later you would have switched out of this fund and into the latest best performing fund – Henderson UK & Irish Smaller Companies – and repeated this process every 6 months.
If you’d stuck with the process you would now be up by a staggering 5970%...
…which is over 16.5x the return of the UK All Companies sector average (360%)
In money terms, if you had invested £100,000 in January 1995 it would have grown to a very satisfying £6,070,910 compared with just £460,470 if you were able to replicate the UK All Companies sector average.
…with more risk?
In Table 1 you’ll see the stats of the Bonkers Portfolio vs. a couple of indices (the sort of indices that you might have wanted to invest in via a cheap tracker fund).
Over the years, the portfolio has held a wide array of funds and you would have had difficulty cherry-picking them any other way. In terms of more recent holdings, the portfolio invested in UK smallcaps, India, Biotech and Japanese equities. In January 2017 we have switched everything into Neptune European Opportunities.
In one sense this is just a bit of fun, as few would be comfortable with the volatility. Yet there is a very serious underlying lesson, which is vital to your success.
If you have a clear and proven process for selecting funds with outstanding potential, and you have the discipline to apply it rigorously, you can reap huge rewards.
ACTION FOR INVESTORS
FURTHER READING
Table 1: Bonkers portfolio ratios and returns (1/1/1995-31/12/2016)
|
Name
|
Overall Return %
|
Annualised Return %
|
Volatility %
|
Historic Value at Risk %
|
|
Bonkers Portfolio
|
5970.91
|
20.49
|
27.01
|
10.65
|
|
FTSE 100
|
397.60
|
7.56
|
13.60
|
6.32
|
|
S&P 500
|
748.57
|
10.20
|
15.61
|
5.64
|
|
UK All Companies Sector Average
|
360.47
|
7.18
|
13.72
|
5.16
|