Jay Taylor’s Model Portfolio vs. S&P 500
We Beat The Street continues on. From January 1, 2000, through June 30, 2009, a $1,000 investment in our hypothetical Model Portfolio would now be worth $2,884, while that same amount put into the S&P 500 would be worth a mere $1,057. And that is before factoring out lost purchasing power from substantial and growing inflation.
Year 2000 marked the beginning of a secular bear market in stocks that we think
will last 15 to 20 years. We constructed our Model Portfolio on January 31,
2000, because we believed a secular bear market in stocks was born. Because
gold and gold stocks are negatively correlated with the market in general,
gold and gold shares are the backbone of our Model Portfolio.
How Are Returns for Our Model Portfolio Calculated?
Our Model Portfolio is a hypothetical portfolio. That is to say, we do not run an actual portfolio exactly like the one we use as our Model Portfolio. In its construction, we apply the following methods and assumptions:
Various sector allocations are chosen including producing gold and silver stocks, gold and silver exploration stocks, inflation hedge stocks, such as energy (including uranium mining stocks) and base metal mining stocks, as well as “essential technology” stocks. (We define “essential technology” as those companies that can reduce the cost of producing the most basic life-sustaining products, such as water, energy, and food.)
At the start of each year, a portfolio allocation is made for each of these sectors as well as an equity hedge sector (the Prudent Bear Fund–BEARX) and a bond hedge sector (the Rydex Juno Fund–RYJUX).
It is assumed that each stock within each sector is equally weighted at the start of each new year.
The total gain for a given sector is simply the sum of all the gains and losses, divided by the number of stocks in that sector. The percentage of gains or losses of each sector is then multiplied by its respective weighting, and the sum of the various sector performances is the Model Portfolio’s performance.
Gains are not annualized. So, for example, a stock that was recommended on December 1 and gained 100% by the end of the year enhances returns no more than a stock that gained 100% over 12 months. The Model Portfolio’s gain or loss for each year is simply the total of gains for each sector, times the respective weighting of each sector.