Saturday, September 8, 2007

Bookkeeping: Rising Tide Growth Fund Performance

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I will update the fund's performance every so often, either monthly or quarterly. I am measuring myself against the Russell 2000 since the majority of the holdings in my fund are small and mid caps. Marketocracy.com measures as a default against the SP500.

The fund is now about a month old; and due to a quirk of when I started the fund which was in effect Monday August 6th, my start date for all measurements is the close of Friday August 3rd which just so happened to be (aside from the close on August 15th during the worst of the correction) the lowest close of the year 2007, and in fact the lowest close since early November 2006. So this quirk will hurt my performance in the near term, as the fund was obviously nearly 100% in cash the first day, and it takes time to ramp into positions.

Meanwhile the Russell 2000 ramped up from 755.4 on Monday August 6th to 774.1 by Wednesday August 8th (+2.47%) and a day later on Thursday August 9th it was up to 795.7 (+5.33%). Meanwhile the fund was just transferring from 100% cash to some entry level positions during that time frame, missing out on most of that 2.5-5% jump. So it was a volatile time to start the fund, and if I had officially started 3 days later my starting point for the Russell 2000 would of been 795 instead of 755, well over 5% of difference. Since it took a few weeks to get the fund fully invested that was just bad timing. In 2-3 years time it won't matter much, but for month 1, quarter 1, and year 1 of the fund, that bad luck in timing will hurt near term performance measures.

With that said, since inception the fund is +3.54% vs Russell 2000 +2.70% = +0.84% outperformance. Nothing special there.

However, if I had 'officially' started the mock fund 2 days later, the Russell 2000 (basis 774.1) would of returned +0.21% and if I had started 3 days later (basis 795.7) it would of returned -2.50%. So the fund's Year to date return of +3.54% vs either of those numbers would look more impressive. With the Russell 2000 trading in the 770s/780s for most of the 2 weeks after inception, that is probably a more accurate 'start' point. Mentally I am using Russell 775 as a fair value starting point.

In the past week, the Russell 2000 has returned -2.15% vs the fund's return of +0.11% - so now that I am fully invested some of the returns are looking better. Obviously having the ETF short positions as the #2, #3, and #4 holdings in the fund, along with a >20% cash position the past week also helped to offset the losses in the long holdings.

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