Investment porn - today's edition courtesy of CNN

[hoppy08520]

77-year-old trader: How I made a lot of money on CNNMoney

Paul Glandorf rattles off stock ticker symbols the way most people talk about popular TV shows and music.

At age 77, he is anything but a stereotypical Wall Street trader. He lives in Ohio and prefers casual "retiree clothing." (He put on a tie for this photo.) But his returns would make many top investors salivate.

He participated in an investing competition in 2013 where you had to buy five stocks on January 1 and hold them through the end of the year. His portfolio finished the year with a whopping 71% return...

...Since he took over managing and trading his own funds in 2001, he is clearly doing something right. Glandorf said that he typically invests about $10,000 each in a portfolio of about 75 to 80 stocks. So that means he is putting between $750,000 to $800,000 to work in the market....

The bold emphasis is mine.

OK CNNMoney, please prove your statement that "he is clearly doing something right" over the 13 years he has managed his own portfolio. You offer NO empirical evidence that he is, other than a good year in 2013 picking five stocks (just try repeating that success over 13 years).

If you were an actual journalist, then you would have supported your statement with an analysis of his actual risk-adjusted returns over the past 13 years and compared them to, say, a conventional index fund portfolio. But you didn't. So your article is a joke -- a total puff piece.

And even if he is beating the market over 13 years, if you were an actual journalist who writes about facts and not just puff pieces, you might have pointed out that he is a rarity and that his experience is not easily duplicated.

I enjoy human interest stories as much as anyone, but if you're going to write that "he is clearly doing something right," then please back it up with some actual fact-based analysis. A one-year outsized return in a stock-picking contest in a bull-market year does not qualify. Obviously someone is going to win the contest; winning the contest doesn't prove your investing strategy is right going forward. It may just be luck. This just strikes me as lazy reporting. She just got a few quotes from him and wrote an article that, while interesting, offers no real guidance that you can put to work.

[staythecourse]

Who knows maybe this guy is doing something great? Maybe he is >3 S.D. beyond everyone else. I know folks who have consistently beat the market net of fees. If no one was successful at active investing then no one would even try. The only reason folks even try is that there is a very few minority who do it and are successful. Think about it as playing the lottery. If no one ever won would anyone even waste a dollar?

The question folks need to ask is NOT is active management possible, but what are the chances. Lets take jaywalking for example. Almost everyone would jaywalk across a country road, but how many would do it across a highway? The reason is probabilities. The probability of failing is so high with active management and that is the reason to avoid it. Just like avoiding jaywalking across busy highway.

There have been and will always be folks who beat the market. That doesn't mean the chances are high you will be successful. I don't know about others, but my goal of investing is simply to get from point A to point B in the safest manner possible. I have OFTEN told folks I wish active management was possible, but I just haven't seen a reproducible way to do it. I passively invest not because Mr. Bogle or the bogleheads says so, but because it is the most reproducible way to increase my net worth.

Good luck.

[hoppy08520]

staythecourse, I agree, there are certainly people who can beat the market and I admire this guy. I'd love to have lunch with him. I'm not trying to be a grumpy index-investor who wants to shout down anyone who beats the market. My beef with the article is that I'd like to see some actual numbers on his returns.

[VictoriaF]

I am concerned that at the age of 77 Paul Glandorf spends too much time on the financial porn and does not leave enough time for porn.

Victoria

[Sbashore]

I am concerned that at the age of 77 Paul Glandorf spends too much time on the financial porn and does not leave enough time for porn.

Victoria

Maybe he's a socially responsible investor.

[mickeyd]

"he is clearly doing something right"

is a pretty darn vague statement to base an article on. Even a blind squirrel...etc.

[ccieemeritus]

I participated in a stock picking contest once (with virtual money, you don't actually buy the stock). The winner gets the prize. The 200 losers get nothing and lose nothing. So I picked an airline with a current market price below $1. Even a small fluctuation upwards would put me in contention.

Of course, with real money I'd never do that. But buying swppx won't win any contests.

The fact that he won a stock picking contest does not make me want to follow his example with real money.

[White Coat Investor]

Chances are good that neither the journalist nor the stock picker knows how to calculate a return. Not to mention include taxes and expenses in the return.

[hoppy08520]

Chances are good that neither the journalist nor the stock picker knows how to calculate a return. Not to mention include taxes and expenses in the return.

LOL! Well let's send a link to your blog on using XIRR in a spreadsheet. This has helped me immensely.
http://whitecoatinvestor.com/how-to-cal ... -function/

[RenoJay]

I read that article yesterday. I also mentioned that he pulled all his money out of equities at the end of 2007. That alone was a pretty savvy move.

[Mel Lindauer]

Anybody remember the Beardstown Ladies who supposedly beat the market for years and years. Like this article, "journalists" who wrote about them never bothered to verify the information they were reporting.

As Ronald Reagan said, "Trust, but verify!".

[baw703916]

I don't know, if you have equally-weighted holdings in 75-80 individual stocks, you're probably reasonably diversified--any individual stock that tanks is only 1.3% of your portfolio. You're not paying an exhorbitant expense ratio or a load for someone to pick those stocks for you. And, because you are deciding when to buy and sell, you can (in theory) manage taxes by TLHing short term losses, make sure all realized capital gains are long-term, time purchases/sales to avoid dividends, etc.

Not a great way to invest IMO, but there are worse ones.

[Jack FFR1846]

Did he make 71% for just one year or does he do that every year? If he did it for one year, I'll say "big deal". If he does that year in and year out, then that's impressive.

[The Wizard]

Sounds like that Paul fellow has a good approach actually, from back before index funds were invented.
He minimizes Specific Company Risk by spreading over a large number of stocks, no more than a few percent ot total in each?
Compare this to what some people apparently have in AAPL, for instance.

But what a hassle to handle 75 different stock holdings, I would guess.
Would be nice if he's invented some sort of portfolio management software to tell him what to do next...

[Fallible]

Anybody remember the Beardstown Ladies who supposedly beat the market for years and years. Like this article, "journalists" who wrote about them never bothered to verify the information they were reporting....

Who could forget the ladies? Actually, those who failed to verify included the book publisher (there were 5 books in all about their "success"). I had forgotten how their errors were finally exposed, so checked Wikipedia and initial credit apparently goes to Eric Tyson (generally a favorite of Bogleheads) who noted lack of documentation, and then an article in Chicago magazine leading to the club hiring Price Waterhouse to audit. There's probably no other case quite like this one (so far...), but I agree, Mel, it does have bearing here because, really, no matter how valid the source, it's still just a one-source story and readers are owed independent verification.

Here's the wiki link: http://en.wikipedia.org/wiki/Beardstown_Ladies

[triggerfish10]

I missed that a thread had been started about this article yesterday, so I started a new one this morning. It is interesting to note that thus far my thread has only gotten 1 reply - perhaps next time I need to include "porn" in the subject line to garner more attention