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  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio [View instapost]
    "I've seen comments and articles related to the Sharpe ratio and never quite got the reasoning, thanks for laying it out so clearly." - Miz

    Thanks for the compliment Miz. As part of my 'debates' in some of the comments sections for Dave's prior article(s) I actually went and looked up what criteria is generally accepted as being successful for MPT.

    Wikipedia's introductory paragraph for MPT provides a definition:

    "Modern portfolio theory (MPT) is a theory of finance that attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets."

    DVK's DGP provided an opportunity to measure, in MPT's own terms, the relative performance of a DGI portfolio which is directed by a non-professional investor over a reasonably meaningful time frame.

    While future performance might differ, I think that the exercise shows that a considered DGI approach to investing can enable retail investors a chance to match or exceed the performance of 'the market' and by extension 'most' professionally available funds or ETFs.

    "Barras, Scaillet and Wermers tracked 2,076 actively managed U.S. domestic equity mutual funds between 1976 and 2006. They found that after fees, three-quarters of the funds exhibited zero “alpha,” a fund’s excess return over a benchmark index. And 24% of the funds were run by unskilled managers (who had negative alpha, or value subtraction).

    And — are you sitting down? Only 0.6% — you read that right, 0.6% — showed any true skill at beating the market consistently, “statistically indistinguishable from zero,” the three researchers concluded."

    I'd say DVK is nearer the 0.6% group than most. He may not be winning every year, but over time he is getting ahead of the market (SPY) on a risk adjusted basis.

    And now we have the data to prove it. ;-)
    Jul 15, 2015. 10:09 PM | 2 Likes Like |Link to Comment
  • Surprise! Cash Invades The Dividend Growth 50 [View article]
    $13.15 is enough to buy a cheap 12 pack of beer (or a better quality 6 pack).

    With all these extra and difficult financial decisions to make the staff probably deserves a 'bonus' of some sort.

    Just sayin'.
    Jul 14, 2015. 09:33 PM | 3 Likes Like |Link to Comment
  • Measuring The Success Of Your Dividend Portfolio [View article]
    "Since there is no way of knowing for sure, since I know of no existing article of what was invested in 7 years ago, I guess it really doesn't matter." - FinancialDave

    But you only need to know the DGP and SPY values on a monthly basis to calculate the Sharpe Ratio. You don't have to know the DGP components at all.

    When you estimated the Sharpe Ratio for SPY above did you account for the 94 companies which left the SPX since 6/1/2008 and were replaced by other companies? I'm thinking probably not.

    Fortunately DVK was kind enough to send me monthly DGP values to use in calculating his Sharpe Ratio.

    I did just that for the entire seven year period. I detail the results in an Instablog I just finished writing:

    I'd spoil the fun if I told you the end result here. Click through to my Instablog and see what happened. :-)
    Jul 14, 2015. 09:24 PM | 2 Likes Like |Link to Comment
  • DVK Portfolio Comparison To SPY, Using Sharpe Ratio [View instapost]
    Sorry for the odd table formatting. I couldn't figure out how to get the data to center in the columns. Thankfully we are still able to read them.
    Jul 14, 2015. 09:06 PM | Likes Like |Link to Comment
  • Measuring The Success Of Your Dividend Portfolio [View article]
    "The DVK portfolio Standard Deviation is 9.29 while the SP500 is 8.55 and the Sharp ratio is 1.26 vs 2.06 for the SP500 (larger number being a better risk adjusted return). Both of these based on a 3 year look-back from todays portfolio, which will be somewhat skewed by the fact the portfolio has changed" - FinancialDave

    Three years ago is the point where DVK's portfolio had its biggest lead over the SPY (as eyeballed on DVK's website graph). Given that they are now at the same place in TR for all 7 years it stands to reason that the SPY has outgained DVK over those 3 years and would thus have a good chance at a better Sharpe Ratio.

    I still believe that DVK's risk/reward ratio (Sharpe Ratio) is better over the entire 7 years. With a Beta of ~75% the annual volatility has to be lower than SPY's annual volatility, AND, both have nearly the exact same TR over the 7 year span, so I believe DVK's risk was lower (as measured by annual volatility over the full 7 years) to get the same TR.
    Jul 13, 2015. 10:23 PM | 4 Likes Like |Link to Comment
  • How A Public Pension Crisis Is Driving An Epic Credit Boom [View article]
    This is not the credit bubble you are looking for. Move along...
    Jul 12, 2015. 10:25 PM | Likes Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    Facebook and others have added solar power for server farms in Prineville, Oregon. The solar power generated isn't enough to run the entire operation, generally, but it is often used for any office spaces in the buildings.

    Additionally, one of the driving reasons why these companies have added solar power is because of the savings in property taxes that are offered, the savings of which more than offset the cost of the solar farms.

    "Oregon has attracted large data centers from Apple, Google, Facebook and Amazon because the state offers property tax exemptions through its enterprise zone program, and because it has no sales tax on the pricy computers that run server farms. Those tax savings are worth tens of millions of dollars a year to a large data center, exceeding the considerable power bill these tremendous facilities generate."

    No tax break, and there's likely no solar power. It's only economic because it is subsidized through reduced taxes.
    Jul 10, 2015. 03:09 PM | 6 Likes Like |Link to Comment
  • "No near term positive catalysts" for coal stocks, analyst says [View news story]
    I should think a yield of 10.75+% with a dividend coverage ratio of 56% would be a reason to consider nibbling at ARLP. They've also been increasing the dividend steadily for the last several years. That's seems reasonably positive to me.

    Coal fired power plants aren't going to be replaced in a hurry. They'll need coal to generate power for many years to come, IMHO.
    Jul 9, 2015. 07:50 PM | 5 Likes Like |Link to Comment
  • Nothing But Sunshine For This Cloud-Based REIT [View article]
    I also learned of DLR from one of Brad's earlier articles. Picked some up at $49.32 and plan to hold with my current YOC of 6.9%.

    I add my thanks to the heap already expressed for the detailed update. It's nice to see that the business doesn't seem to need much in the way of monitoring going forward. Consistent, steady growth works for me.
    Jul 9, 2015. 12:16 PM | Likes Like |Link to Comment
  • Here's Why Altria Is A Dividend Growth Machine [View article]
    Long MO since early 2011.

    Dividend increase to $0.56 puts me over 9% Yield on Cost. Wooooo!

    Do yourself a favor and buy the dips.
    Jul 9, 2015. 10:18 AM | 2 Likes Like |Link to Comment
  • Dividend Champion Portfolio July Update [View article]
    Do the values in your spreadsheet include shares bought with dividends, or are the dividends collected separately in cash and not shown on the spreadsheet?

    I would offer the following suggestions as constructive criticism:

    1) Report how much you collected in dividends each month. The "High Yield" label indicates that it is an income portfolio, right?

    2) You show the 'before' rebalancing amounts in the table above, you might show the 'after' values too so people can see what changed.

    3) Maybe add a table that shows the total portfolio value and total income for each month of the past year so folks can see how things are progressing.

    Thanks for taking the time to post your results. Your methodology seems reasonably sound for being so simple. More detailed results will help folks see how well it is performing as you go forward.

    David Van Knapp has been posting his demonstration Dividend Growth Portfolio results for the past 7 years. You can see what and how he provides the updated information at this link:
    Jul 8, 2015. 07:43 PM | 1 Like Like |Link to Comment
  • Looking Beyond The Obvious: Critical Thinking And Investment Decisions (Part 1) [View article]
    "Preferred can have their place in a portfolio, but you have to really understand them. Casual investors should stay away." - giorgiolb

    I didn't realize there was a formal dress code for preferred stocks. Thanks for pointing it out. Gosh I'd be so embarrassed to try buying some wearing my cargo shorts and a tank top when everyone else had Tails on.

    Jul 8, 2015. 07:25 PM | 2 Likes Like |Link to Comment
  • There's Always Something To Do: Q2 Portfolio Review [View article]
    Faye, you are probably one of the busiest writers I read on a regular basis. Thanks for the update and good luck with the options dabbling.

    PS. I always get a chuckle out of the name A. Couche Tard. I realize it translates as 'Night Owl', but it sounds more like a behind the back insult ("What a couche tard that guy is!"). LOL. Well, maybe it's just me. ;-)

    I'd sure be laughing pretty hard if I'd bought some OTCMKTS:ANCUF (google finance symbol) back in early 2009. It's price has been increasing at ~47% annually since then. Wow! Nice find.
    Jul 7, 2015. 06:44 PM | 1 Like Like |Link to Comment
  • Measuring The Success Of Your Dividend Portfolio [View article]
    "There are a number of free and commercial apps that you can use to view and/or edit excel spreadsheets on a Mac." - fuzzy222

    In addition you can use Google Documents spreadsheet capability:

    You'll need to have a Google account to sign in, but once that is set up you can create basic spreadsheets that are saved online in your account.
    Jul 5, 2015. 09:13 PM | 2 Likes Like |Link to Comment
  • Measuring The Success Of Your Dividend Portfolio [View article]
    "have you read the very last comment on your 7th anniversary article, where I suggest that maybe your portfolio value or TR is a bit overstated and the TR of the portfolio is lagging that of the SPY" - FinancialDave

    A simple comparison of the end values puts SPY just ahead of DVK's portfolio (approximately +0.1% CAGR difference over 7 years) at the end of June 2015. Yet there is more to the picture than that. According to the tenets of MPT:

    "Modern portfolio theory (MPT) is a theory of finance which attempts to maximize portfolio expected return for a given amount of portfolio risk, or equivalently minimize risk for a given level of expected return, by carefully choosing the proportions of various assets."

    Given that DVK's portfolio has a Beta closer to 0.7 - 0.8 than SPY's 1.0, I would assert that DVK's risk-adjusted return exceeds that of SPY by at least 12%. His portfolio has demonstrated excess alpha over a 7 year span per the MPT 'rulebook'. He has roughly matched SPY's gains at a much lower level of risk.

    Did anyone else notice? If I had to guess, it will become more noticeable during the next significant market swoon when the SPY value drops more than DVK's portfolio value does.

    Well done DVK. You are too modest when you permit TR adherents to ignore the extra risk entailed with SPY when comparing it's returns to your results. Your initial response to anyone who points out that SPY is edging you out is to note "But my risk is much lower than SPY. My risk-adjusted returns beat SPY handily, and I thought that was a defining characteristic of MPT/TR investing."
    Jul 5, 2015. 01:05 PM | 10 Likes Like |Link to Comment