Motley Fools, Passive & Active Investing

Photograph:  Mt. Bachelor in Central Oregon

If you need more evidence to support passive rather than active investing, here is another article on what is happening over on the Motley Fools web site.  In the 1990s, I was a regular reader of material on the Fools site. At the time is was the most popular investment web site to visit.  I devoured their popular book, "The Motley Fool Investment Guide."  In that book, David and Tom Gardner took Michael O'Higgins 'Dogs of the Dow' idea, tweaked it slightly, and made it increasingly popular.  Along came an anonymous Fools contributor, Datasnooper (later changed to repoonsatad), who applied statistical analysis to the Dogs of the Dow investing method.  He also performed out-of-sample analysis as compared to in-sample analysis and showed Dogs of the Dow to be a classic case of data mining.  One can read about Dogs of the Dow in O'Higgins book, "Beating the Dow." My brother was interested in this approach and did a detailed study of the Dogs and came to the same conclusion as Datasnooper.  Dogs of the Dow worked with in-sample-data, but not out-of-sample data.

After months of heated debate on the Fools site, the Motley Fools staff eventually cried "Uncle" and admitted the mechanical investing system did not work.  The Dogs Portfolio is not the only one that was pulled from the Fools site.  Swedroe is now pointing out the drag fees have on active management and we investors, be they large or small, are better off taking a passive approach to investing.

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Portfolio Performance Data: 4 March 2011

Photograph: Harley at the cabin in Central Oregon

Platinum members will find the performance data below.  This is the first complete update since the February statements became available.  In almost every situation, the portfolios gained ground on the VTSMX index.  Quite a few showed improvement in the Sortino and Retirement Ratios, possibly the key measurement.

Platinum membership is available for $5.00 per month.  Learn how to construct, maintain and monitor a diversified portfolio.

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