By Mike Adams
If you knew a money manager that had achieved an average 29% annual return for 13 years, would you believe that the average investor who invested in his fund lost money? It may be hard to believe, but it is true. Peter Lynch, one of the top money managers in history, achieved that return with the Magellan Fund. Fidelity did a study and found the average investor in Magellan actually lost money.
I shared that with a client this past week, and my client revealed that he had been one of those investors who lost money in Magellan. How did that happen? When the fund was down, the client sold out, worried that the fund would continue down. When the fund had recovered to new highs, he reinvested only to sell again when the fund was down.
It is human nature to fear that a fund or portfolio that has outperformed will return to the average by underperforming for some period of time. Emotions can be our worst enemy when it comes to investing. The founder of Vanguard said in his 50 years in the business he knew of no one, nor did he know of anyone, who had ever known of anyone who consistently outperformed the market by buying and selling.
Which brings me to the returns in the Incentive Profit Sharing account, and an estimate of the Growth Accounts. After excellent out performance in the past 12 years and especially in the last 2 years, the returns in 2021 are trailing the S&P 500 TR. The composites of the Growth Accounts were up 40% in 2019 and 77% in 2020 and the Profit Sharing Accounts were up 241% in 2020.
In my opinion this is the time to buy in. The old saying is “buy low and sell high”.
While the S&P 500 TR at the end of May 2021 was up 11.90%, the Growth Account composite was up, by my estimate, 2.03%, and the Incentive Profit Sharing accounts were down 5.6%. I am guardedly optimistic that now is an excellent time to invest in both.
The benefits to you are simple:
Customized to you - unique to you and your specific needs and risk tolerance.
15-year track record of high performance on long-market accounts
Minimizing Risk
Tax Efficient
No fee – just profit sharing on the $1 million account
Classified as a Conservative, not High Risk, Account.
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Article Written by:
Mike Adams, President & Principal Adams Financial Concepts LTD.
206-903-1019
1001 Fourth Ave, Suite 4330, Seattle WA 98011
1. Past performance is no guarantee of future performance
2. AFC uses the S&P 500 with dividends reinvested as the comparable index for all accounts.
3. AFC Managed Accounts returns include all active accounts as well as all closed accounts with the same objective: to beat the S&P 500 over the longer-term (10 years).
4. Adams Financial Concepts (AFC) Managed Accounts results are net of all fees and expenses. The results are net, net, net.
5. AFC Managed Accounts do not include the results of the Incentive Profit Sharing Accounts.
6. The performance presented is that of actual client accounts and includes all equity Growth Accounts with one quarter or more. These are not hypothetical, models or back tested.
7. Portfolios are concentrated in as few as 8 equities. Since William Sharpe received the Nobel Prize for showing there is no significant difference in volatility risk for portfolios of 8-9 stocks as compared to 300 stocks. In other words, AFC subscribes to the Mark Twain philosophy of putting all our eggs in one basket and watching the basket.
8. AFC Managed Accounts include capital gains and losses, both realized and unrealized, but do not include the impact of taxes on capital gains.
9. “I’m always fully invested. It’s a great feeling to be caught with your pants up” – Peter Lynch. AFC accounts are always fully invested.
10. AFC accepts that there will be times when there will be periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare us out of the market.
11. Incentive Profit Sharing Accounts include all active Profit Sharing Accounts and the results are net, net, net.
12. Incentive Profit Sharing was initiated on April 1, 2020 and has a very limited history, but we believe it will be verified in the longer-term.
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