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A Few Notes on The Gone Fishin’ Portfolio

| | Posted in: Individual Investing, Investing Expertise, Strategic Allocation

In the preface to the 2021 edition of his book, The Gone Fishin’ Portfolio: Get Wise, Get Wealthy…and Get on With Your Life, Alexander Green sets the following goal: “[S]how readers the safest, simplest way to achieve and maintain financial independence. …I’ll cover the investment basics and unite them in a simple, straightforward investment strategy that will allow you to earn higher returns with moderate risk, ultralow costs, and a minimal investment of time and energy. …Setting up the Gone Fishin’ Portfolio is a snap. Maintaining it takes less than 20 minutes a year.” Based on his 35 years of experience as an investment analyst, portfolio manager and financial writer, he concludes that:

From Chapter 1, “The Unvarnished Truth About Your Money” (Page 14): “You need to plan. You need to save. And you need to manage your money intelligently.”

From Chapter 2, “The First Step on the Road to Financial Freedom” (Page 22): “In short, a successful investment program begins with disciplined saving. Regular saving remains the safest, easiest and most effective way to boost your portfolio.”

From Chapter 3, “Change Your Mindset, Change Your Life” (Pages 28-29): “Investment success is mainly about knowledge and personal accountability for our choices and actions…”

From Chapter 4, “Why Some Investors Succeed…But Most Don’t” (Pages 33-34): “Investors fail because they either aren’t using a proven strategy or can’t adhere to it. …the Gone Fishin’ Portfolio…consists of 10 funds. Those recommendations are based on a strategy of asset allocation and annual rebalancing.”

From Chapter 5, “Why Manage Your Own Money?” (Page 55): “Simplicity and patience lie at the heart of the Gone Fishin’ Portfolio. And you won’t need an investment advisor to put it together–or run it.”

From Chapter 6, “Know What You Don’t Know” (Pages 63-64): “You’re on the right track the day you say to yourself, “Since no one can tell me with any certainty what the economy or stock market will do next year, how should I run my portfolio? …to embrace the Gone Fishin’ Portfolio, you have to let it go. Rather than pretending to have answers we don’t have, we accept the uncertainties.”

From Chapter 7, “Common Stocks” (Page 78): “History clearly demonstrates that no other asset class returns more than stocks over the long haul. Once you understand this–and accept the steep odds against timing the market–you’ve made the first step toward adopting an investment strategy that can generate high returns with an acceptable level of risk.”

From Chapter 8, “Don’t Buy What Wall Street is Selling” (Pages 82, 90): “…skip buying and selling individual stocks, which requires a lot more time and attention, and own mutual funds or exchange-traded funds (ETFs) instead. …the Vanguard Group is the best mutual fund family for constructing the Gone Fishin’ Portfolio…”

From Chapter 9, “Your Single Most Important Investment Decision” (Pages 99, 103): “…asset allocation…is your most important investment decision. …our basic asset allocation is 70% stocks and 30% bonds. But the suballocation–the types of stocks and bonds we’ll use–varies from traditional models. It is designed to be both aggressive enough to boost your long-term returns and uncorrelated enough to smooth out the inevitable bumps along the way.”

From Chapter 10, “The Gone Fishin’ Portfolio Unveiled” (Pages 112, 120-121, 123): “The asset allocation model I created recommends that you have 30% of your portfolio invested in U.S. stocks, 30% in foreign stocks, 5% in real estate investment trusts (REITs) and 5% in gold shares. The remaining 30% we’ll divide evenly between three different types of bonds. …there needs to be an interval of at least a year and a day between each time you set your portfolio and rebalance. …the Gone Fishin’ Portfolio–rebalanced on December 31 each year–performed better than the S&P 500 over the 20-year period from 2000 to 2019. And this was with far lest risk than being fully invested in stocks.”

From Chapter 11, “The ETF Alternative” (Page 145): “The first thing to consider when evaluating whether ETFs are right for you is the cost ratio. …There are potential brokerage commissions to consider with ETFs.”

From Chapter 12, “Why the Gone Fishin’ Portfolio Is Your Best Investment Plan” (Page 158): “The beauty of the system is that you’ll never be out of the market and therefore miss out on the kind of great returns that only stocks have given over the long term. You will never be fully invested in stocks either, and take a drubbing as many investors did in the savage bear markets of 2000-2002 and 2008-2009, and briefly in the first quarter of 2020.”

From Chapter 13, “How to Legally Stiff-Arm the IRS” (Page 165): “Tax-managing your portfolio is essentially your asset location strategy. …you ideally want to own your least tax-efficient assets in your retirement account and your most tax-efficient outside them.”

From Chapter 14, “The Last Two Essentials” (Page 176): “…here’s a quick-and-dirty calculation…to determine how much money a person needs to reach financial independence. Take your required annual income–apart from Social Security and any pension income you may receive–and multiply it by 25.”

From Chapter 15, “Your Most Precious Resource” (Page 184): “The pursuit of ‘the very best’ asset allocation is not required to achieve your investment goals. What’s more important is to develop a reasonable asset allocation–that includes a fair number of uncorrelated assets–and stick with your decision through thick and thin.”

From the Afterword (Pages 194, 197): “…I don’t want readers to infer that I subscribe to the efficient market hypothesis (EMH) or its sister, modern portfolio theory (MPT)… I’m ready to concede that beating the market over the long haul is harder than it looks–and many if not most amateur investors will fail. Still, for those investors who truly enjoy hunting big game and devoting the hours required to become good at selecting stocks, there is no reason to be pessimistic.”

In summary, investors will likely find The Gone Fishin’ Portfolio an easy-to-understand and thorough approach to implementing a simple passive long-term investment strategy.

Cautions regarding conclusions include:

  • As for all backtesting, future market conditions may differ from those applied in the book for backtesting.
  • As noted on page 145, the Gone Fishin’ Portfolio suffered a -31.7% drawdown in 2008, nearly as deep as the -36.6% for the S&P 500 Index.
  • The author emphasizes the long term in investing. He incorporates no glidepath up to and through retirement. An investor nearing or in retirement may not tolerate the drawdown risk of the Gone Fishin’ Portfolio.
  • A gold miners ETF, as recommended for a gold position in the book, is arguably not a good proxy for gold. See “GDX and GDXJ vs. GLD”.
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