Tag Archives: Burton G. Malkiel

My investment fund

After two years of investing for fun, I was troubled because neither the ING internet banking tool nor Google Finance enabled me to correctly monitor the profitability of our investments.

  • Google Finance shows each new addition of capital as an increase of assets (price) in the same way as if a particular stock had increased its market price. So after a year our portfolio showed an increase of 97%… but most of it was due to new additions of capital.
  • While with ING, each time we added some cash it lowered the profitability as it went directly to the denominator of the equation (the same happens with Google Finance “gain”).

I discussed this with Luca, read a little bit and then I found out that the best way would be to treat ourselves as a mutual open-ended fund (fondo de inversión). I had to define a net asset value per share (valor liquidativo de la participación) at the beginning of the period and then treat each addition of capital as an issue of new shares to ourselves.

After spending sometime digging in the files and emails of the past two years, reading a bit about how to treat these values, etc., from now on we can readily compare at any moment our “J&L investment fund” with any other fund, stock or index. So did I…

If we had a commercial mutual fund we would announce ourselves with something like:

  • In the year 2010 the gains of the fund were +22.8% compared to
    • S&P 500 ~ +13% (target index)
    • Dow Jones ~ +11%
    • NASDAQ ~ +17%
    • IBEX 35 ~ -17%
    • Euro Stoxx 50 ~ -10%
  • The gains of the fund since its creation in January 2009 have been +86.6%, with a compounded annual gain of +37.6%.

Not bad.

Nevertheless, if we compare it to the leading Spanish value investing fund managers from Bestinver, in 2010:

  • Bestinfond ~ +19%;
  • Bestinver Internacional ~ +26%;
  • Bestinver Bolsa ~ +5%

Since January 2009 both Bestinfond and Bestinver Internacional have fared better than “J&L”, though not Bestinver Bolsa.

Today, now that is already defined, the net asset value per share is 57.19€… however “J&L fund” is not yet that open-ended: it’s open to our own additions to the fund but not to third-party capital… maybe in a couple of years we go and set up an investment club or fund :-).

After reading Ben Graham’s book “Intelligent Investor” I wanted to give it a try with investing, this is why I invest in stocks myself, but, clearly, if you are tempted to follow third-party advice, rumours, tips, etc., you’ll be better off just investing in a low-cost index fund (a strategy described by Burton G. Malkiel’s book “A Random Walk Down Wall Street”) or take a look at the above-mentioned value investing managers.

NOTE: “J&L fund” numbers are pre-tax of capital gains, include dividends (after-tax) and are net of transaction costs & commissions.


Filed under Investing

Monkey Investors

Just a few weeks ago I wrote a post about the Wall Street Monkey. Remember that the story was based on Burton G. Malkiel’s book, “A Random Walk Down Wall Street”, where he suggested that a blindfolded monkey throwing darts to select stocks wouldn’t do worse than professional fund managers.

I watched yesterday TED Talk by Laurie Santos, “A monkey economy as irrational as ours”, where she explains how she studied whether our mistakes were due to a badly designed environment or badly designed minds.

She made several studies with apes, introducing the use of money to them… and she found that apes show the same irrational behaviours regarding risk taking as we humans do…

I loved especially the following passage around minute 16:30…

“… we can actually give the monkeys a financial currency and they do very similar things we do. They do some of the smart things we do, some of the kind of not so nice things we do like stealing and so on… but they also do some of the irrational things we do; they systematically get things wrong and in the same ways that we do.

This is the first take-on message of the top… if you saw the beginning of this and you thought: “…oh! until I go home and hire and put a monkey as financial advisor … they were cuter than ours…”, don’t do that: they’re probably gonna be just as dumb as the human one you already have!

At least, apes would charge us less… just a couple of grapes.

“A monkey economy as irrational as ours”, by Laurie Santos.

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Filed under Books, Investing

International Day of the Book

Today is the commonly known as International Day of the Book. I learnt in the Wikipedia that it is actually called by UNESCO: “World Book and Copyright Day” (I wonder how the copyright part of it is celebrated…).

There, I also learnt that this tradition was originated in Catalonia, Spain, and that even though it is commonly stated that is the anniversary of the death of both Cervantes and Shakespeare (23rd April 1616), that is not correct as at the time England was using the Julian calendar instead of the Gregorian one, thus Shakespeare died 10 days later.

Recommendations. My contribution on this day is the recommendation of the 3 books of those I read last year that I liked the most:

  • “Augustine’s Laws”, Norman R. Augustine.
  • “A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing”, Burton G. Malkiel.
  • “Particula Divina” (“God Particle”), Leon Lederman.

In the same way I would appreciate if you leave your recommendation of the books that you liked the most of those you have read recently in a comment to this post.

E-Books. Two weeks ago I read in The Economist an article about the publishing industry. It cited a study, from PwC, which estimated that consumer ebook sales in North America will have a share of 6% of the market in 2013 (up from 1.5% in 2009). That would be one out of every 16 people. However, I think I only know of one person reading e-books as of today (a member of Excelencia who spoke about it a year ago). Let’s see if we find more people doing so:


Filed under Books