Our Gone Fishin' Portfolio Delivers Another Good Year

Nineteen years ago, when Alexander Green created the Gone Fishin’ Portfolio - the most conservative portfolio in his monthly newsletter The Oxford Communiqué - he asked Members a question:

If I could show you a way to manage your money yourself, using a strategy as powerful and effective as any used by the nation’s top financial institutions... that will allow you to outperform the vast majority of investment professionals... that imposes zero sales charges, brokerage fees or commissions... that takes less than 20 minutes a year to implement... and is based on an investment strategy so sophisticated it won the Nobel Prize in economics, would you be interested?

The answer was a resounding “Yes!”

(Alex's book on the subject - out just a few years later - became an immediate New York Times bestseller. A revised and updated edition - with a new foreword by longtime Chairman’s Circle Member Bill O’Reilly - came out last year.)

The Gone Fishin’ Portfolio is a battle-tested strategy built on the most advanced principles of money management.

And - as its 19-year track record attests - it works.

At its foundation is the only realistic premise for an investment program: that, to a great extent, the future is unknowable.

No one can be sure what will happen to the global economy, interest rates, the dollar, or world stock and bond markets each year - or even each decade.

(The S&P 500, for instance, delivered a negative total return from January 2000 through December 2009.)

Rather than pretend that we can eliminate uncertainty, the Gone Fishin’ strategy makes it our friend.

We capitalize on unpredictability by dividing the portfolio among 10 noncorrelated asset classes - represented by one exchange-traded fund (ETF) and nine low-cost Vanguard funds - that reflect our Oxford asset allocation model.

Once the portfolio is set up, you simply take 20 minutes a year to rebalance it. (That means returning the portfolio to the original asset allocation once every 12 months.)

The rest of the time you are free to “go fishin’,” whether you define that as golf, travel, time with the grandkids or actually casting a line somewhere.

Last year the portfolio - with dividends collected - returned 10.72%.

That’s less than the S&P 500 returned in 2021. But this portfolio is far more conservative than an all-stock portfolio.

Thirty percent - 10% each - is in high-grade bonds, high-yield bonds and inflation-adjusted Treasurys.

The Gone Fishin’ Portfolio also has substantial exposure to international markets that have underperformed the U.S. market over the last decade.

Yet, if history is any guide, they will almost certainly outperform again in the future.

Why do we use index funds rather than actively managed funds? Because our investments are based on numbers not narratives.

Investment consulting firm Greenwich Associates notes that “over 10 years, 83 percent of active funds in the U.S. fail to match their chosen benchmarks; 40 percent stumble so badly that they are terminated before the 10-year period is completed.”

Low-cost, tax-efficient index funds are the perfect foundation for long-term investors.

An investment of $100,000 in the Gone Fishin’ Portfolio in January 2003 - with dividends - was worth $518,663 at the end of 2021.

(These figures are net of all costs and can be verified using Vanguard’s own numbers.)

We also have a longtime ETF version of this portfolio, and its long-term returns, as you’d expect, are virtually identical.

The Gone Fishin’ Portfolio allows you to manage your serious money in a serious way. It - or something very much like it - should form the foundation of your investment program.

Why use it? Because it eliminates six major investment risks:

  1. It keeps you from being so conservative that your purchasing power fails to keep up with inflation.
  2. It prevents you from being so aggressive that your portfolio goes up in flames.
  3. It eliminates individual security risk. (Every investment is a broadly diversified fund, so there is no chance of a single security - think Enron or Lehman Brothers - causing your portfolio to crater.)
  4. It overcomes delegation risk. You can manage this portfolio yourself. So no one can mismanage your money, run away with it or siphon off an ocean of fees.
  5. It eliminates economic forecasting and market timing. Since these can’t be done accurately and consistently - and therefore don’t add value - they are no part of this strategy (or any of my investment strategies, for that matter).
  6. It eliminates wasted time and effort. While others spend countless hours evaluating market data, financial advisors or competing theories about the future, you’ll have gone fishin’ instead.

Give full consideration to that last point.

Your most valuable asset is not your home, your bank account or your investment portfolio.

It’s the amount of time you have left on this little blue ball.

The Gone Fishin’ Portfolio gives you a high probability of increasing your net worth. But it guarantees you more time with the people and pastimes you love.

Perhaps that is what recommends it most.