How Are We Doing?

This world is full of people offering investment guidance. But is their perspective any good? It’s rare that prognosticators are held accountable for the predictions they espouse, and investment managers often mask their losers while touting their winners. This column is approaching its six-year anniversary, so it’s time for some din v’cheshbon. How have the investments we’ve praised done over the past six years? What about the investments we frowned upon? How have readers who followed the guidance on these pages fared? Hopefully, I’ll still have your confidence when this article is over!

Buffett’s Favorite Fund

Long-time readers know that I advise most investors to stick to simple, low-cost mutual funds and real estate they control themselves. To that end, in multiple articles (dated 3/22/18, 9/21/18, and others), we mentioned the S&P 500 index fund (SPY). And as shown in the attached chart (see the dark blue line), $10,000 invested in this fund from March 2017, the month my first column in the Voice ran, through the end of 2022 grew to almost $18,000—not shabby for a simple, low-fee option.

Portfolio-in-a-Box Fund

However, the S&P 500 is not a diversified portfolio, which could bite you in certain times and scenarios (11,21,19). To that end, I proposed instead using indexed target-date funds and target-risk funds (1/1/21, 5/27/21). In the chart, you can see that the Vanguard Lifestrategy Growth fund (VASGX, light green line) did okay, growing by 42% over the six-year time frame. I still maintain it’s a great approach for long-term amateur investors.

Easy-Shmeezy Real Estate Funds

I explained (5/29/19) that the easiest way to invest in property is via real estate investment trusts. Alas, the results have been disappointing with Vanguard’s Real Estate ETF (VNQ, light yellow line) growing by just 21 percent from early 2017 through the end of 2022.

VNQ includes a lot of office REITs which have been crushed by Covid and the new trend toward remote work options. A portfolio of the top five REITs focusing only on residential property (dark yellow line) gained 50%, quite reasonable for a no-work investment under the circumstances.

Syndications vs Self-Serve Real Estate

I’ve been skeptical about small investors putting their money into real estate syndications, skipping the transparency, diversification, and low fees offered by REITs. All real estate was hit hard by the rise in interest rates, and many investors in syndications are learning that their investments are struggling or even in jeopardy. A good chunk of them are probably worse off versus REIT investors. But many syndications got the timing and deal selection right, and many investors did extremely well partnering in private real estate deals.

Simple Single-Family Homes

For those who can handle landlording, I’ve been a strong proponent of investing in real estate via renting out single-family homes (6/21/18), a relatively easy way to gain profit, tax benefits, and hedge inflation (8/16/18, 5/27/21). Owning houses with solid mortgages has offered astounding gains over the past few years and probably outpaced most syndications when you consider capital gains. Our column suggesting that people not shun home buying early in the Corona crisis (5/14/20) also proved prescient baruch Hashem.

Failing Hedge Funds

The Hedge Fund Research Indices (not charted here) show five-year returns in the low single digits for a typical fund. I voiced my skepticism about hedge funds, largely due to their complexity and gargantuan fee drags (9/21/18). And indeed, as a group, they trailed far behind the S&P 500 and even the fully diversified portfolio fund mentioned above. Sure, there are exceptions to every rule and statistic, but will a typical investor find them? The lesson of Warren Buffett’s bet lives on (3/22/18).

Burned by Tech Stocks

I’ve been skeptical about people who think they can pick good stocks in their free time (11/30/17, 07/17/20). But millions jumped on high-flying technology stocks when they soared in 2020 and 2021. Others were enamored by funds like ARK Innovation ETF (ARKK, light blue line), which focus on a small sliver of tech stocks. I use that fund as a proxy for headline-driven investors, and you can see in the chart that over time, ARKK did okay, not great. But also note how those who jumped into tech late in the game i.e., headline-driven investors, lost their pants. 

Leveraged Funds Offered a Hollow Win

The Proshares Ultra S&P 500 fund (SSO, red line) aims to double the daily returns of the S&P 500, offering a ton of haphazard risk for a questionable boost in performance. Even though SSO is the best-performing asset of this bunch, I still maintain, as I wrote back on 5/2/19, that leveraged ETFs are not tools for nonprofessional investors. Note that over 100 leveraged funds went totally bust in 2020.

Crypto Casino Still Open

On 9/14/17, I wrote that “the Bitcoin ‘casino’ is no place for you and your savings.” Since then, the crypto industry boomed and busted wildly, but the price of bitcoin is still 400% higher than six years ago! But that doesn’t mean the advice given was wrong. Time has also proven that the crypto world is riddled with dreamers, schemers, and scammers. Speculating with a few dollars in bitcoin or ethereum may be justified, but that bizarre Wild West is still not a realistic option for casual investors.

Guided from Above

Hopefully, this zoom-out overview of the past has offered you some valuable perspective. Please remember, however, that this column is just an educational resource, not personalized investment advice. You or your licensed professionals need to decide what makes sense for you. Finally, we invoke the timeless words of the Chumash with Targum Unkoles (Devarim 8:18), “V’zacharta es Hashem Elokecha ki Hu hanosein lecha ko’ach la’asos chayil”—Hashem is the One Who guides our decisions and even plants the ideas in our heads that bring about positive results or otherwise. It is He Who gives us “the advice to purchase property.”

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