First Post

Saw my friend Phil Bok's new ACSI fund on LinkedIn. Phil's a very smart guy and I like his fund, but I had to test it and that led to this blog where I will test any fund against indexing.

Criteria I will use on every test are as follows:

1-Easy free public data only.
Too many studies use proprietary, modified data that everyone can't check.  If your study uses these, no go for me.  Fund issuer data and Yahoo data is freely available as of this writing. If you claim that Yahoo's data is bad, well, you know, we all want to see the plan. My answer is that I sometimes test for that and Yahoo data is generally very good. Finally, why Yahoo? Because if Yahoo doesn't list it, is it really widely available for the average investor? Show me a more popular and free data source and I'll use it.

2-Continuously compounded daily returns only.
I like easy arithmetic. I compute the daily return = ln(b/a), where a = Yahoo's "adjusted close" on day 1 and b = the "adjusted close" on day 2. Adjusted close is its own issue and my tests for that are pretty good too.

3-Volatility = the excel population standard deviation function-STDEV.P
Simple and as good as any other measure and does not buy in to the fiction that term rearrangements add information.

4-Correlation = the excel correlation function.
Correlation is important because we don't want to buy the same returns in a different wrapper.

5-Select maximum, calendar year and rolling time periods, only.
Tricky one. Every possible time period will have a different result. A perfect track record would beat in every possible time period-impossible!  So how do you pick a fair time period? You don't pick; you use the same periods for each test and look for consistency.

6-Use VFINX or SPY as the index.
You can buy these; you cannot buy the S&P500 Index.

VOO is a great choice too but is 17 years too late. VFINX is the mother of all indexes but it's a mutual fund not an ETF and ETFs are where it's at in today's markets. So, if you have a mutual fund, VFINX will be the index. If you have an ETF, SPY is the bogey.

That's it. If you have a public track record on Yahoo or somewhere that can beat it, send me the symbol. Maybe there's a million out there that nobody knows about.

Disclaimer: This blog is not investment advice, is for information purposes only, may be subject to change without notice, and while prepared with care, may be subject to omissions and errors.