80-20 Investor outperformance revealed

12 min Read Published: 20 Aug 2015

80-20 Investor officially launched to DIY investors in January 2015. Since then 80-20 Investor has gone from strength to strength in terms of members and also in performance and the value it adds.

Yet you may be aware that, prior to its official launch in January the Best of the Best Selection had been running since the 1st August 2014. That means that we have just passed the 1st anniversary of the Best of the Best Selection. With a year's worth of real live data it is now possible to see how the Best of the Best Selection has fared.

80-20 Investor's outperformance

We produce the Best of the Best Selection as a shortlist of the best funds highlighted by our 80-20 Investor algorithm split into high, medium and low risk categories.

The green line in the chart below shows how a portfolio would have performed over the last year if it had been split equally between the Best of the Best Selection funds and then switched each month when each new shortlist was published. I have also charted the performance against that of the FTSE 100 (the black line) and the average balanced managed fund (red line) and the average managed fund with up to 85% equity exposure (blue line). In reality the 80-20 Investor's asset allocation typically lies between these two as it usually has 60-85% exposure to equities at any one time. So they provide a good comparison of how fund managers with a similar remit have fared over the same period.

As you can see in just 1 year the 80-20 Investor portfolio outperformed the average UK fund manager by between 3.68% and 5.85%!

If you compare it to the wider market (the FTSE 100) the 80-20 Investor Selection outperformed the market by 7.28% in just one year!

These are huge amounts in just one year and the extra growth would also be compounded over time the longer you invest. Also don't forget that during the last year we've endured market sell-offs spurred by concerns over global growth, a Chinese bear market as well as the Greek debt crisis. A return of 11.16% for the 80-20 Investor selection is quite incredible.

80-20 Investor performance

80-20 Investor boosted performance in 2 ways

The chart below is the same as the one above but with the addition of an orange line which shows what would have happened if you'd simply followed the 80-20 Investor Best of the Best Selection's asset allocation and ignored the actual funds it invested in. Or in other words simply picked random funds in the sectors that the 80-20 Investor Selection liked each month.

As you can see you would have once again beaten the average fund manager by just under 1% a year. That might not sound much but an extra 1% a year on a typical equity fund portfolio would mean that your portfolio would be worth 10% more in just 10 years.

So 80-20 Investor boosted performance in 2 ways 1) via asset allocation (the orange line) and then 2) by highlighting the best funds in those asset classes to be in (the green line).

asset allocation

What if you never reviewed your portfolio?

I am often asked how regularly you should review and change your funds. 80-20 Investor is designed so that members can use it how regularly they want. Some people review funds every month while others do so less frequently. So I decided to analyse what would have happened if you had bought the funds suggested in August 2014 and simply stuck with them for a whole year (the purple line) vs changing them each month (the green line once again).

1 year portfolio no change

The difference is 2.68% over the whole year. But there are a number of interesting observations to point out:

  • Regularly reviewing your portfolio boosted your performance
  • Yet even if you never reviewed your funds 80-20 Investor would still have boosted your returns so that you outperformed the market and the average fund manager!
  • In the early months the portfolio which was regularly reviewed actually underperformed in parts but the regular review eventually pulled you out of the bad investments and boosted your returns. This pattern will accentuate even more over time.

So this is proof that 80-20 Investor works for you however you choose to use it!

What would have happened if you had acted upon every stop loss alert?

80-20 Investor sends email alerts to members if a fund within the current month's shortlist falls by 5%. The purpose is to help avoid severe market corrections. The chart below shows the difference in performance between following every stop loss alert and completely ignoring them. Once again you would have outperformed the market and the average fund manager. So the stop loss meant that you secured the upside while limiting the potential loss from a significant correction. In reality in the last year we have not had a significant correction but if we had then the stop loss portfolio would likely have been the top performer.

You can think of the difference in performance between the two lines as the insurance premium for the downside protection.

stop loss

Why 80-20 Investor also works for small investors

Another question I am often asked is what is the minimum portfolio size to make an 80-20 Investor membership worthwhile. Well based on the last year's performance, if the above figures were reflective of the average membership then an additional outperformance of 5% over the market suggests that a portfolio size of just £5,000 would have been sufficient to benefit from an annual membership.

Claim your free trial of 80-20 Investor now

You can claim your FREE 30 Day FREE trail of 80-20 Investor here

How 80-20 Investor will help make you a better investor:

  • It's designed to help you make investment decisions in minutes (when you want) - letting you enjoy life
  • It will quickly tell you exactly what funds to buy and when with clearly displayed data, based on our unique algorithm.
  • 80-20 Investor will help protect your money from a market crash by telling you when to sell via email - NO ONE ELSE DOES THIS!
  • It does not matter where your existing investments are held (be it through the likes of Hargreaves Lansdown or otherwise). Anyone can use 80-20 Investor
  • You will also receive weekly & monthly newsletters
  • 80-20 Investor is independent & we analyse 1,000's of investment funds every week including unit trusts, investment trusts & ETFs
  • Regular exclusive research & market commentary which is regularly sought by the national press including The Times & The Telegraph
  • Access to regular DIY investment lessons. Lessons learned from a career in investment research & talking to fund managers, which are built into 80-20 Investor
  • 80-20 Investor members can even submit research requests to a leading investment expert. Think of it as having an investment expert in your pocket (the service is optimised for smartphones, tablets as well as laptops)
  • Access to see the holdings within our £50,000 portfolio which is run live on the site so you can see how we successfully run our own money

 

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Funds invest in shares, bonds, and other financial instruments and are by their nature speculative and can be volatile. You should never invest more than you can safely afford to lose. The value of your investment can go down as well as up so you may get back less than you originally invested.
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