Our Long-Term Performance

OK, But How Did Your Portfolios Do During The Crash?

 

For the Time Period Jan. 1, 2008-August 31, 2010, Here Are Our Results:

(N.B.:  These figures do not include quarterly re-balancing, which we now DO do for our clients):

Low Risk Portfolio 10.76% Cumulative Return, 3.91% Annual Avg.

Medium Risk              1.72% Cumulative Return, 0.64% Annual Avg.

Medium High          (7.31%) Cumulative Return, (2.81) Annual Avg.

High Risk             (16.34%) Cumulative Return, (6.47%) Annual Avg.

Just for comparison sake, the S&P 500, over the same time period, looks like this:  (24.04) Cumulative Return, (9.80%) Annual Avg.

 

Respectfully Submitted,

Robert C. Broderick, Jr., Esq.

Principal

FSB Winchester Asset Management LLC

7 Kendall Street

Winchester, MA 01890

(617) 538-4317

 www.FSBWinchester.com

robert.broderick@FSBWinchester.com

Twenty-Four Percent Less, REALLY?!

Here's the shocking truth regarding your portfolio:  The single largest factor determining your NET return per annum is probably the FEE you pay. (Asset allocation is the second "biggie", but I'm assuming that even the "bail-out boys" don't mess that one up for you.)

Please have a gander at the NET return differential, based upon historical figures, for two of FSBW's portfolios and an IDENTICAL account held at a major brokerage:

Our Lowest Risk Portfolio (Avg Annual Gross Return of 8.99%)

Account Value W/FSBW's .5% Fee   W/TARP Firm's 2% Fee

Start                              100                                      100

After 5 Years             150                                       140

After 10 Years          226                                       196

After 20 Years          510                                       386       

Due to compounding, one invested dollar, subject to the 8.99% historical annual return growth rate of our Low Risk Portfolio grows to $3.86, if your Advisor charges 2%, which is fairly standard.  That same dollar, with an identical 8.99% gross return/annum, grows to $5.10 with FSBW’s fee.  This calculates to a 24.3% difference in your account value.  Recall that this assumes IDENTICAL returns with each provider:  FSBW and your local TARP firm.

Our Highest Risk Portfolio (Avg Annual Gross Return of 10.72%)

Account Value W/FSBW's .5% Fee   W/TARP Firm's 2% Fee

Start                              100                                      100

After 5 Years             179                                      165

After 10 Years          265                                      231

After 20 Years         700                                      532    

If your portfolio returns 10.72% per annum (as our High-Risk Portfolio has done historically), your dollar becomes $7.00 over 20 years with FSBW, but only $5.32 with your 2% Advisor.  (A similarly stunning 24 % LESS in your account and in the broker and firm’s coffers!)

Investing with FSBW is terrifically more-cost efficient, would produce a superior result and you would have the added benefit of dealing with someone you know, like and trust.  Why continue to over-pay for under-performance (which, due to compounding, significantly increases that same under-performance)?

Respectfully Submitted,

Robert C. Broderick, Jr., Esq.

Principal

FSB Winchester Asset Management

7 Kendall Street

Winchester, MA 01890

617.538.4317

robert.broderick@FSBWinchester.com

www.FSBWinchester.com

 

 

Reap The Benefits of Intelligent, Cost-Effective Investing!

 

I invite you to consider investing some portion of your portfolio with my firm, FSBWinchester.  We do not seek to replace any existing advisor you may have, but to supplement same.

I have posted in the previous blog entry the four portfolios which I have created and offer to clients.  Please note the conclusion regarding returns and fees.

Each of our portfolios is comprised of a percentage of US and foreign equities, and US Bonds.  Crucially, our total fees are 0.5% of your account value, measured at end of quarter.  This is ¼ to ½ of those fees charged by “traditional brokerages” for similar services.  This savings, and the compounding effect of same on your account, is critical to our model’s success.

A few important points to note:

•  FSBW serves no conduit function or holding capacity for funds (a la Madoff).  All client accounts are transferred directly from wherever they currently reside to a Fidelity account to which FSBW (and the client) have access.  Alternatively, a client account may be established by simply writing a check.  A client may decide to terminate FSBW’s access to same at any time without “cashing out”, transferring to another brokerage firm or worrying that the whole thing was some sort of ruse.  If FSBW ceases to exist or I am struck by lightning on a golf course, the client’s account will continue with Fidelity without interruption.
• FSBW, as set forth on our website and in our blog, runs SOLELY a non-discretionary system, BY DESIGN.  There is no credit, nor blame, for any account’s performance.  All results are simply an operation of the model, choosing your optimal ratio of exposure to US equities (by purchase of the ENTIRE market), foreign equities (again, measured by the broadest, and oldest, known index) and the bond market (by purchase of the US Treasury Index). This is done for two reasons:  1. Primarily, this is mathematically the most effective method of investing.  If our job is to maximize your account value over time, this is the historically-observed most efficient model; and 2. This method eliminates all advisor/client disappointments.  There is no, “Why did we buy Coca-Cola” or “What about this new start-up in Minnesota that has this wonderful NEW IDEA”.  If you wish to engage in those sorts of flights of fancy, you may always do so on your own, but, honestly, you have much better odds in Las Vegas.
• My clients DO NOT USE their FSBW accounts for “transactional” or “month-by-month” purposes.  All of their auto-pays, auto-deposits, etc. are left by the client in whichever account they currently reside.  Your new FSBW account is not meant to REPLACE your “transactions” account, but to supplement it. Most clients retain some already-existing account with a major brokerage and simply “carve out” a portion thereof to invest with FSBW.  (Once they see the return differential, they end up “carving out” more.)

To learn more, please feel free to visit website at www.FSBWinchester.com or our blog at http://fsbwinchester.com/blogspot.

Investing with FSBW is terrifically more-cost efficient, would produce a superior result and you would have the added benefit of dealing with someone you know, like and trust.  Why continue to over-pay for under-performance (which, due to compounding, significantly increases that same under-performance)?

Respectfully,

Robert C. Broderick, Jr., Esq.

Principal

FSB Winchester Asset Management, LLC

FSB Winchester Announces Four New Portfolios With International Exposure

 

In response to client demand, FSBWinchester is pleased to announce the introduction of four newly-created portfolios, each with International exposure.

In conjunction with FSBW’s flat yearly fee of 0.5%, these portfolios, based upon historical performance, may be expected to yield between 8.49% and 10.22% NET OF FEES, per annum (and with relatively low standard deviations).

We humbly suggest that whomever is assisting you with your investments at this time is NOT providing a NET return within, or in excess of, our historical range.

 

LOW RISK

STATS:

Avg Annual Return (Geometric)                                    8.99%

Annualised Standard Deviation                                    6.91%

Worst Single-Calendar Year                                         (2.19%)

Worst Two-Calendar-Year Run                                    (0.55%)

Worst Three-Calendar-Year-Run                                  7.81%

 

Our Low-Risk Portfolio is comprised of  80% United States Bond Holdings, 14% United States Equity Holdings and 6% International Equities.

 

MEDIUM RISK

STATS:

Avg Annual Return (Geometric)                                  9.68%

Annualised Standard Deviation                                  8.44%

Worst Single-Calendar Year                                        (6.73%)

Worst Two-Calendar-Year Run                                 (10.53%)

Worst Three-Calendar-Year-Run                               (1.28%)

Our Medium Risk Portfolio is comprised of  60% United States Bond Holdings, 28% United States Equity Holdings and 12% International Equities.

 

MEDIUM-HIGH RISK

STATS:

Avg Annual Return (Geometric)                                        10.26%

Annualised Standard Deviation                                         10.88%

Worst Single-Calendar Year                                              (12.80%)                  

Worst Two-Calendar-Year Run                                         (20.00%)

Worst Three-Calendar-Year-Run                                      (15.15%)

 

Our Medium-High Risk Portfolio is comprised of  42% United States Equity Holdings,  40% United States Bond Holdings and 18% International Equities.

 

HIGH RISK

STATS:

Avg Annual Return (Geometric)                                              10.72%

Annualised Standard Deviation                                               13.76%

Worst Single-Calendar Year                                                    (18.86%)

Worst Two-Calendar-Year Run                                               (28.97%)                      

Worst Three-Calendar-Year-Run                                            (27.66%)                            

Our High Risk Portfolio is comprised of 56% United States Equity Holdings, 24% International Equities and 20% United States Bond Holdings.

 

CONCLUSION

 

Due to compounding, one invested dollar, subject to the 8.99% historical annual return growth rate of our Low Risk Portfolio grows  to $3.86  if your Advisor charges 2%, which is fairly standard.  That same dollar, with an identical 8.99% gross return/annum, grows to $5.10 with FSBW’s fee.

 

If your portfoilio returns 10.72% per annum (as our High-Risk Portfolio has done historically), your dollar becomes  $7.00 over 20 years with FSB, but only $5.32  with your 2% Advisor.  (A stunning 24 % LESS in your account and in the broker and firm’s coffers!)

 

Business and Friendship Don't Mix (or Do They?)

When I was approached with the idea of starting my own Asset Management Firm (technically, it is a Registered Investment Advisory Practice, formed as a Limited Liability Corporation), I was not comfortable with the prospect unless I could structure the enterprise in such a manner as to represent friends and family without the risk of any hard feelings--on either side.

I grew up with the notions that "Business and Family" and "Business and Friendship" do not mix as fundamental axioms by which to live one's life.

Then again, my grandmother used to say, "Idle hands are the devil's plaything", when, in fact, "idle hands" are essential for gripping golf clubs.

So perhaps not all of those axioms dispensed from on high during my childhood would prove so inviolable.  The mixing of family, friends and business can work quite nicely, but only under the right circumstances.

The model which we use at FSB Winchester is one which I am completely comfortable sharing with friends and family, for a few reasons:

1.  It works.  In fact, it works better than anything else out we have ever seen over any statistically significant length of time.  (We've done the math).  I have no problem recommending to someone about whom I care the most effective means by which they may achieve a result which they desire.

2.  It is non-discretionary.  Since the system dictates all allocations, there is neither credit nor blame for any result.  The result simply IS, solely and directly a product of the system.  (Remember what Paul Westhead said, "Run the System".)

3.  I care about these people.  Well, I care about all of my friends, anyway. How could I stand by watching them continue to achieve inferior results and being vastly-overcharged for it?

Business and friendship and family DO mix when the result is a better status for all involved.

Respectfully submitted,

Robert C. Broderick, Jr., Esq.

Principal

FSB Winchester Asset Management

My Broker Said, "I Make Money When You Make Money"

This is the standard method by which the large Investment Houses sell their "Wrap Fee" representation.  [More on "Wrap Fees" here: Wrap Fees.]

The basic idea presented to you, the potential client, is this: My firm will charge you a certain percentage of your total account value (generally 1-2% per annum) for ALL of our advice, custody of assets, account protections, glossy brochures, endlessly deforesting junk mail and Special Client Wine and Cheese receptions.  Therefore, the thinking goes, in order for us to make more money, it is in our interest to make darn sure we provide the advice and services necessary to GROW your account.  Hey, you have more, so we make more!

This puts us both, Mr. Potential Client, "on the same side of the table".

 

Wow, where shall I begin?

A.  If you are considering entrusting any funds, for any reason, at any time, to someone who must assure you that he or she "is on your side of the table", run, do not walk, to show him or her the door.  What is the alternative-that the person whom you are paying to manage your money stands at some variance to your best interests?  Should we also hire mechanics to wreck our cars or Doctors to make us sicker?

B.  Just as the old joke about Lawyers goes, when your broker is saying anything, make sure you have both hands on your wallet.

C.  The statement itself, "I Make Money When You Make Money", is technically true, as far as it goes.  A more forthright explanation of the proposed arrangement would be, "I make money (1-2%) when you sign the account papers, and I'll continue to draw that percentage from your account unless and until you close your account with me.  It will not matter whether the account value remains flat, diminishes or grows, I'll continue taking my percentage."

 

Now, let us assume that you have fallen for the siren song of Mr. Edward J. Cashgrabber, Financial Advisor and First Vice President of [insert TARP Firm here].  Let us further assume that you have placed an even $100,000 in the account, and that "Fast Eddie" is charging you a fairly standard 2% wrap fee.

Now, Mr. Cashgrabber would have explained to you that it is in his best interest to do everything humanly possible to grow your account value, in order for him to maximise his income from your account.  Hey, 2% of a bigger account is more income, right?

Firstly, understand that you are down 2%, right out of the gate, by virtue of the fee having been charged.  Now, if Fast Eddie is interested in maximising his income (and you can be very sure that he is), will he be more concerned with making sure that his established accounts grow, or in getting more accounts?  The marginal income to him when his established accounts grow by, say 10%, is a mere 2% of the growth rate.  That works out to $200 for him IF your $100,000 account grows by 10%.  Recall, he netted 2% ($2000) when you signed, and will net 2% of the total account value until you leave.  I'll wager his next beamer payment that he's out chasing new accounts, and keeping you just happy enough to stick around.  (And so will he.)

FSBWinchester Asset Management: Speaking Truth to Power Since 2009.

 

Respectfully,

Robert C. Broderick, Jr., Esq.

Principal