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Thursday, October 11, 2007

Why Continue to Talk About QQQQ Trade?

On Wednesday, October 10, 2007, Honeybee posted the article:

Two Important Bob Brinker Market-Timing Anniversaries
In the comments section, she was asked:
"Why do you and Kirk keep beating that dead horse that Bob has all ready laid to rest?"

My answer:

Saying "oops" does not mean it was "laid to rest."

Being laid to rest would be Bob Brinker reporting his results that included following his October 2000 NASDAQ 100 advice in his model portfolios such as we have done in this article: Effect of QQQ advice on reported results

The conclusion is anyone who followed Brinker's advice with 50% of cash reserves that was also in his "model portfolio for aggressive investors" saw their totals reduced 29.5% from what Brinker reports in his advertising.

  • Brinker's P1 on 01/01/88 $20,000 Brinker's P1 on 07/27/07 $206,144
    Brinker's Reported APR 12.7 %
  • QQQQ Effect is 29.0 % or $59,782
  • Subtract QQQQ Effect $146,362
  • QQQQ Adjusted APR 10.7 %
  • Wilshire 5000 APR 12.0 %
    (Wilshire 5000 APR over the period 1/1/88 to 7/27/07 was calculated by Padraig Cremin of Wilshire Associates Inc and "Ivan Smile" in post #40. )
Someone doing due diligence should know that following Brinker's market timing advice for his best performing Portfolio #1 under performs the Wilshire5000 by 1.3% per year over nearly 20 years. With compounding, as shown HERE, this "performance penalty" means:
  • $10,000 compounding at 10.7% between 1/1/88 and 7/27/07 grows to $73,181
  • $10,000 compounding at 12.0% between 1/1/88 and 7/27/07 grows to $91,848

If you are fine paying for market timing advice to underperform the Wilshire5000, perhaps you do much worse on your own and value the hand holding, then that is fine. Read Winning on the zigs, losing on the zags to see that most people on their own significantly under perform. But you should be aware going in of the past historical record.

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