Wall Street WARZONE
‘Super-Brain’ Portfolios for Bulls & Bears: 8 Passive Portfolios of No-Load Index Funds Regularly Beating the S&P 500
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/21/2010

Want to see inside the mind of a “SuperBrain Investor?” What makes a winner? Simple. Here’s how the legendary money manager Peter Lynch put it in his classic, One Up On Wall Street: “Think like an amateur. If you invest like an institution, you’re doomed to perform like one, which in most cases isn’t very well. If you’re a surfer, a truck driver, a high school dropout, or an eccentric retiree, then you’ve got an edge already.” Get it? The “SuperBrain Investor” thinks like an amateur.

Okay all you crafty irrational investors—here are some of the best of the “Super-Brain Portfolios” from my Lazy Person’s Guide to Investing, the best ones since first introducing them way back in 2002, now being updated daily on DowJones MarketWatch.com. And yes: They’re still as dull and boring and lazy as back then—and the best are still beating the S&P 500 in bull and bear markets, with no timing and no trading!

And guess who’s most interested in the lazy portfolios! A survey of our email responses tells us that although we initially thought these simple portfolios were mainly for passive do-it-yourself Main Street investors, as time passed we’ve discovered that this strategy is actually used by three different kinds of investors, many of whom are Wall Street insiders: First. Passive investors: the vast majority of America’s 95 million investors. Second. Wealth managers & financial advisors for high-net worth individuals. And third. Financial industry pros protecting their own family’s retirement assets. (More)

“Super-Brain Portfolios” Gained 40%-51% in Year Rally March 2009-2010!
by Paul B Farrell, JD, PhD
| Discuss | Print | 3/21/2010

Good news: Here’s a quick update of the eight “Lazy Portfolios,” aka our Warzoners’ “Super-Brain Portfolios,”  all built using ”Modern Portfolio Theory” and no-load index funds. At year-end ’09 their one-year returns averaged 24% to 33% … now (3/21/10), near the end of the 1st quarter 2010, they’re up more, averaging 40% to 51% the twelve months. Longer term, they’re lower, closer to historical averages, but clearly our eight portfolios did extremely well riding the 2009 rally in style.

Here’s how we put it just before Christmas ’09: All 8 portfolios had one-year returns averaging 24% to 33%. The Second Grader’s Starter Portfolio, for example, has 3 funds: Bogle’s S&P 500 index fund (VFINX) plus the Total Bond Index (VBMFX) and Total International Stock Index Fund (VGTSX). The Starter’s 33% returns beat the S&P 500 by 2% with no trading, proving Buffett’s point: “A great IQ is not needed to do well as an investor,” just “the ability to detach yourself from the crowd,” like the Second-Grader. The “crowd” will chase the two hottest funds in the eight portfolios (The Emerging Markets Stock Index (VEIEX) was smoking at 79% in 2009, and the REIT Index Fund (VGSIX) a hot 39%). But if you really want to succeed, remember: “It’s the portfolio, stupid.” Diversify, think long-term, build a balanced portfolio, and never trade hot funds or stocks. (More)