Opinion on Intelligent Investor Growth and Income Portfolio and ETFs?

[RandomInvestor]

Hey guys wanted to get your opinion if you have tried the growth or income portfolio on the IntelligentInvestor website, I have considered buying it but I felt like the expense ratio was too high, though it does offer a 15% return before taxes and that.

Also if you are a growth investor do you think it's alright to have some income aswell? Does it all depend on your goal?

 

[luutzu]

Hey guys wanted to get your opinion if you have tried the growth or income portfolio on the IntelligentInvestor website, I have considered buying it but I felt like the expense ratio was too high, though it does offer a 15% return before taxes and that.

Also if you are a growth investor do you think it's alright to have some income aswell? Does it all depend on your goal?

These are still newsletter type recommendations right? They just pick "growth" to recommend for growth portfolio etc.

Even if they actually managed these funds, don't do it man. It's all a bunch of marketing bs. These guys just pick a nice word to label their picks and that's pretty much it.

Neither safety nor growth are guaranteed in this game. The only thing that guarantee both would be a good quality business. i.e. if a company isn't earning money, there won't be any for that dividend income; If a company isn't earning money, there won't be any to grow and expand the business. like Buffett said, growth is part value.

I actually did a quick calculation of II's newsletters recommendations to check out their claims of x% gain. Turns out they "analyse" and recommend something like 250 stocks a year... and if you're to follow all the buy/sell recommendations, your broker and the taxman would be very happy you've subcribed.

I think that unless you have access to some pricey datafeed and be plugged in to the market as a dayjob, best to stick to studying businesses and pick ones you know that are of good value and quality. Build a portfolio slowly that way. It's more advantageous either way, but I guess one could make quick profit by hearing some news earlier than the rest, maybe.

 

[RandomInvestor]

Tbh Luutzu there is NO guarantee in anything its a choice whether you want to take the risk or not. But interesting comment.

 

[luutzu]

Tbh Luutzu there is NO guarantee in anything its a choice whether you want to take the risk or not. But interesting comment.

Meant to say that II's sales pitch and their reported returns is very misleading. Maybe it's technically legal but it's not practical or practised by any of its subscribers.

So take their claim of 15% return, or whatever it was.

You can't just randomly pick five or ten of their recommendations and make that average 15%. If you're lucky you might get that or higher, but if we do any sort of statistical analysis and pick a handful of their recommendations - i.e. not pick the entirety of all their hundreds of recommendation... then it's a crap shoot, or whatever the phrase is for a roll of the dice.

 

[RandomInvestor]

Ah ok returns are based before takes and that so after all that would probably be 9% or so I imagine.

 

[luutzu]

Ah ok returns are based before takes and that so after all that would probably be 9% or so I imagine.

Depends on that imaginary capital per trade II used in their calculation of "performance".

If your broker has a $500 minimum per trade requirement, then their model would, I'm guessing, put in a minimum trading amount of $1,000 per trade.

If each trade costs $20, that $1k buy/sell would be $40 total brokerage. So that's about 4% off of their performance measure. Then there's the taxes.

They're measuring their performance in a very misleading way... any semblance of proper measurement would be to randomised a "reasonable" number of stocks an average investor would/could hold. This number is not going to be anywhere near the couple of hundreds of recommendations they made per year.

So a proper thing to do would take, say, 10 recommendations at random. See how those performed. Repeat a few times.... or hire some statistician to do these stuff more scientifically. Then average those performances, after fees and taxes etc. etc.

Of course you can't sell stuff if you do that kind of stuff. But then if they won't or don't even think about it, I'd probably not be putting my money on their thinking much at all.

 

[Value Hunter]

Luutzu I could be wrong but I do not think Intelligent Investor actually recommends 250 stocks a year. More likely they made 250 recommendations which would include recommendations to sell an existing position, recommendations to add (buy more) to an existing position and recommendations to hold an existing position. Many, many years ago I did get a free trial subscription from them and at that time from memory they had less than 20 stocks in the portfolio. I am not necessarily saying they are great but I do not think your comment reflects reality.

 

[luutzu]

Luutzu I could be wrong but I do not think Intelligent Investor actually recommends 250 stocks a year. More likely they made 250 recommendations which would include recommendations to sell an existing position, recommendations to add (buy more) to an existing position and recommendations to hold an existing position. Many, many years ago I did get a free trial subscription from them and at that time from memory they had less than 20 stocks in the portfolio. I am not necessarily saying they are great but I do not think your comment reflects reality.

Maybe bad phrasing to say they recommend 250 stocks a year. Meant to say they make something like 250 recommendations, i.e. buy and sell, and probably hold.

I don't remember the exact number of recommendations but I did download one of their old sample newsletter a while back, times that by its yearly publications and the number of recommendations came to something in the 200s to 300s range. Definitely sure it's in the hundreds, not the dozens.

I'm not having a go at II. Simply point out that their claims of some 15% or whatever return if all their advices were followed... while technically legal and true; not very practical if the recommendations are in the hundreds.

 

[Value Hunter]

Luutzu I think you are interpreting the purpose behind the recommendations wrong. A large chunk of the recommendations would require no action from existing subscribers. They might for example recommend to buy a stock, then two months later reiterate the buy recommendation. A subscriber who already owns the stock might choose (they give recommended maximum portfolio weightings for each stock) not to buy any more, however somebody who just subscribed one week before the recommendation might choose to buy some stock. As for hold recommendations you are taking no action. A sell recommendation only applies to the subscribers who already own the stock (they do not recommend shorting). You have to realize that they would constantly have new subscribers coming on board. Given all of the above combined with the fact that they typically hold less 20 positions at any one time I think the portfolio turnover is actually not that high.

 

[luutzu]

Luutzu I think you are interpreting the purpose behind the recommendations wrong. A large chunk of the recommendations would require no action from existing subscribers. They might for example recommend to buy a stock, then two months later reiterate the buy recommendation. A subscriber who already owns the stock might choose (they give recommended maximum portfolio weightings for each stock) not to buy any more, however somebody who just subscribed one week before the recommendation might choose to buy some stock. As for hold recommendations you are taking no action. A sell recommendation only applies to the subscribers who already own the stock (they do not recommend shorting). You have to realize that they would constantly have new subscribers coming on board. Given all of the above combined with the fact that they typically hold less 20 positions at any one time I think the portfolio turnover is actually not that high.

Their performance are based on an investor following all their recommendations right? Wait, it's only based on their BUY recommendations. We'll get to that in a sec.

So a BUY while the subscriber already bought, let say that that's a hold and not a call to add more as you're saying.

A HOLD is a hold if you already held it, but a Do Nothing if you haven't bought in yet.

A SELL, likewise, is to sell if you held but do nothing if you do not have any to sell.

From their sample portfolio reports, just counted that a Growth Portfolio have about 21 stocks, the Income has about 29. This is in a sample $100,000 portfolio.

First... who in their right mind own some 20 stocks with $100K? But say that we can add more zeroes behind that test $100K portfolio...

How many buy recommendations have they made since 2001 to produce that 13.9%p.a return.

486 Buy recommendations.

https://ii-uploads.s3.amazonaws.com/files/reports/recommendations_report_2016_FREE.pdf


Where's the SELL? Subscribers do not sell? Only buy when recommended? That's what that result suggests. Will the performance be the same if they were to include stocks they recommend to BUY then later changed to SELL... I'm guessing the results aren't as impressive.

Now, if we take the average 20 holdings in a portfolio that had made a total of 486 buys. That mean a Sells were 466?

A $100K portfolio with 486+466 transactions, and let's be nice and not include the additional 20 Sells whenever the subscriber want to realise the profit... So that's 952 transaction, at say $20 a pop that's $19,040. Or 19% of portfolio is brokerage fees.

The portfolio would have to be in the millions to minimise that fee to a fraction of the holdings.

Let's ignore taxes because who pays them anyway.

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https://ii-uploads.s3.amazonaws.com/files/reports/recommendations_report_2016_FREE.pdf

So they outperformed the index by 3.7% p.a.

I guess if the investor has about $1M and don't mind the trouble of buying about $2K each time, they might actually do just as well as buying into the Index and hit the beaches all those 15 years.


Not sure why their 112 Speculative Buy perform so badly. Serious... if I have enough spare cash to make that many speculations, I'd do a whole lot better than 7.9%. I mean, higher risk better come with multiple bags of returns to compensate for sleepless nights and all those alcohol and drugs in between.