How Often Does Upgrading Outperform?

by noloadfundx on September 30, 2010

Upgrading doesn’t necessarily move in sync with the market. In fact, it is designed specifically not to move in lock-step with the S&P 500. Sometimes we gain more than the market and sometimes, we lose more than the market. This ability to move independently is essential to generate longer-term outperformance. After all, in order to outperform an index a portfolio must be different from that index.

And Upgrading has generated higher returns over the long term: from December 31, 1999 through April 30, 2010, the Monthly Upgrader Portfolio (MUP), our recommended equity portfolio, gained 92.3%, while the S&P 500 lost -2.8%. But on a more short-term basis, Upgrading may not look as favorable.

When measured on a monthly basis, for example, the MUP only outperformed the S&P 500 index 58% of the time. But over longer time periods, the MUP was much more likely to outperform its benchmark. When we look at the MUP returns on a rolling 12-month basis, the MUP beat the S&P 500 a whopping 80% of the time, and it did so by a larger measure, gaining an average of 9.5% more than the index over the 112 rolling 12-month periods, and lagging it by an average of just 3.5%.

On a calendar year basis, the MUP outperformance is even more striking: the MUP came out ahead of the S&P 500 in nine of the last 10 calendar years.

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