Originally Posted by
DAL 88 Driver
In this example, the average of Fred's annual returns over the 9 year period is 7.21%. His total return for the 9 year period is, as you stated, a little over 4%. That is an important distinction here.
You can't "average" numbers the way she did when you're computing an internal rate of return (IRR) for an investment. The 7.21% is a
nonsense number and is just an average of 9 numbers in a column. That 7.21% can't be used in any type of analysis because it doesn't mean anything from a financial return standpoint.
When one is working with the annualized returns of an investment, you can't simply average them. The average return has to be computed with a financial calculator or a spreadsheet or using a mathematical formula. To be clear, the AVERAGE ANNUAL RETURN of Fred's investment was 4.1%. Fred's TOTAL RETURN over the time period was 43.6%. The AVERAGE ANNUAL RETURN of Snider's example was 7.21%. Comparing a AVERAGE ANNUAL RETURN of 7.21% to a AVERAGE ANNUAL RETURN of 4.1% will always make the 7.21% the winner. Her math is wrong, her logic is wrong, and "consistent" returns aren't better or worse than "zig zag" returns if the IRR is the same for two investments and the time period considered is the same. I guess we're going to have to agree to disagree on this one and I'll let it go after I type this period-->.
Originally Posted by
DAL 88 Driver
My objective is to outperform all other investments over my time horizon, which is hopefully at least another 40 years. Right now, I'm not aware of anything else that is really comparable or that meets my personal objectives as well as the Snider Method. If you've got something better, it would certainly be beneficial to those reading this thread. Heck, I might even want to look at it too!
That's my objective too!! I'm not aware of any investment that has provided a consistent, risk adjusted IRR of 12% per year, every year until I heard of the Snider method, and I would consider myself relatively well read (but dumb pilot). I have heard of many that claim that return, but I've never read any peer reviewed examples that could make consistent returns of 12% a year, year after year, for any significant length of time. If Snider can provide the investment world an auditable record that shows a 12% annualized return for over a decade or so (with a market cycle as a bonus!) with less risk than simply buying and holding the underlying stock/bond/commodity/whatever over the same time period, she will be a very wealthy woman because every hedge fund manager, every mutual fund company, every brokerage house would want her to repeat that return........and they will pay her HANDSOMELY. There have been plenty of open and closed end funds that allow the use of option strategies to enhance returns (and risk), but even though those are professionally managed by very smart people, I don't know of one that made 12% returns consistently, year after year, and certainly not over 15 years.
Once in a while, I'll run across a paper on hedge fund returns like
this one, and keep in mind that hedge funds hire the smartest of the smartest and they have difficulty even beating their benchmarks, never mind making 12% annualized. So if true, the Snider method is doing something that I don't think anyone has ever been able to do for long periods of time, so I wouldn't be able to show you a better method because I don't know of one!!
Good luck. If you make those 15% returns, YOU'RE BUYING THE BEER!!!