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10 Steps to Improve the Return of Your Portfolio

Posted June 28th, 2010 by Kendall Anderson

On May 25th, 2010, Dr. Paul Woolley, former head of the International Monetary Fund’s investment and borrowing activities, founder of the UK arm of Grantham, Mayo, van Otterloo & Co., LLC (GMO), and currently the Senior Fellow at the London School of Economics gave a lecture at the London School of Economics where he laid out ten policies that if adopted, could increase annual returns (after inflation) by 25% and long term returns by at least 50%. He addressed his comments to “Giant Funds” that he described as the world’s biggest public pension and charitable funds. However, we find that his 10-point manifesto will work just as well for individuals, offering the same, if not greater, potential return benefits to their portfolios. 

Whether you own individual stocks, bonds, or you choose to use mutual funds, annuities, the retail version of derivatives, options, indexed annuities or indexed CD’s, we have no doubt that these ten steps will help improve your returns. 

The 10-point Manifesto

  1. Adopt a long-term investment approach (future dividend flows), rather than momentum (short-run price change).
  2. Cap annual turnover of portfolios at 30%.
  3. Understand that all tools now used to manage risk and return are based on the discredited theory of efficient markets.
  4. Adopt a stable benchmark such as growth of GDP plus a risk premium.
  5. Don't pay performance fees.
  6. Do not engage in alternative investments - Hedge Funds, Private Equity, Commodities.
  7. Insist on total transparency of agents' strategies.
  8. Everything in the porfolio should be traded on a public exchange.
  9. Secure full transparency of banking service costs incurred by companies you invest in.
  10. Provide full disclosure of compliance with these policies.

We are so impressed with his 10-points to improving returns that we will be spending some time over the next few weeks to help you understand and adopt them for your own use.

 

Kendall Anderson, CFA

06-28-2010

 

Dr. Woolley’s 10-point manifesto was taken directly from a press release from the London School of Economics and Political Science.  You may follow this link to the original release:

http://www2.lse.ac.uk/newsAndMedia/news/archives/2010/05/giantfunds.aspx

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