To be a successful investor, you must know how to evaluate different investment strategies and the investments you own.
Even many experienced investors overlook important aspects of performance evaluation. You will never know whether you have the right investment strategy unless you properly measure and assess your results.
Absolute vs. Relative Performance
It is critical to track investment results precisely and consistently. Investing is about data and measurement.
At the end of each calendar year, you should record your one-year, three-year, five-year, and ten-year average annual returns.
This gives you your absolute performance.
Absolute performance is important — but relative performance is more important. You don’t know whether your results are good or bad until you compare them to an appropriate benchmark.
For example, earning 10% in a given year may sound strong — but if your strategy should have produced 15%, you underperformed.
Industry Standard Benchmarks
The industry has developed standard benchmarks for virtually every investment category:
Large-cap U.S. stocks → S&P 500
Small-cap U.S. stocks → Russell 2000
International stocks → MSCI EAFE
Bonds → Benchmarks based on duration and type
However, comparing each investment solely to its category benchmark often leads to poor decisions.
For example, an international stock fund earning 9.6% annually over ten years may appear strong if its benchmark earned 9.5%. But if the S&P 500 earned 15.5% during that same period, you should feel differently.
International stocks have historically produced materially lower long-term returns than the S&P 500 while carrying similar or greater risk.
International stock funds have performed well recently, but a couple strong years do not offset decades of underperformance.
Many professionals argue that bonds should not be compared to the S&P 500 because bonds serve a different purpose — downside protection.
They claim bonds are safer and less volatile. That argument makes sense in theory — until you examine real-world data.
In 2022:
The S&P 500 declined 18.2%.
A leading PIMCO bond fund declined 14.4%.
Is a 4% difference compelling enough to justify earning only 2–3% average annual returns over a decade — when stocks returned many multiples of that?
I believe all passive, traditional, investment strategies should ultimately be evaluated against what long-term equity investing can deliver.
Short-term comparisons between asset classes can be misleading. For example, gold has experienced strong gains recently. That does not justify abandoning a long-term stock strategy.
Long-term results matter most.
The Proper Time Period for Evaluation
Many investors make decisions based on short-term results — three months, six months, or one year. These timeframes are often misleading.
Retirement investing typically spans 20 to 30 years. That is the appropriate horizon for evaluating strategy effectiveness.
The only thing investors need to consider when looking at short-term results is whether an investment behaved as it was supposed to. Did its performance match its stated goals or strategy? For example, if you owned a growth stock fund in 2023 it should have performed very well in the last few years. If it didn’t capitalize on a strong bull market for stocks, something is very wrong with that investment. A growth stock fund should have generated 20% average annual returns over the last three years.
Absolute investment returns are mostly meaningless in the short-term. The only thing that you need to look at in the short-term is relative investment performance – how an investment performed against its benchmark. The absolute short-term results don’t tell you anything about the future. Markets are irrational in the short term. Markets are rational in the long term.
I often see experienced investors making investment decisions based on one-month or three-month results. Unless an investment dramatically underperforms against its benchmark in the short-term, investors are making emotional decisions and not rational decisions when they make changes to their investment strategy based on short term results.
Performance Across Market Cycles
You should understand how each investment performs during bull markets, bear markets, recessions, inflationary periods, and sideways markets.
When investing long term, you will experience all economic environments. Nothing should surprise you.
Understanding What You Own
You must know why you own each investment and what drives its returns.
I favor stock investments because long-term stock prices are driven by profits and cash flow growth. Over time, markets reflect business fundamentals.
When you don’t understand your investments, you are gambling and not investing.
Understanding your investments means you know how and why your investment increases or decreases in value. You need to know what factors drive changes in the price of your investments.
It is for this reason that I do not own bitcoin. I understand why so many people are bullish on bitcoin but without an underlying metric that ties back to business value I won’t own bitcoin. There is no way to determine whether bitcoin is fairly priced or unfairly priced at any point in time.
I am not saying that bitcoin will drop in price or increase in price. I am saying that there is no way to measure its value. If I were to invest in bitcoin, I would be relying on luck. Relying on luck is speculation.
When you don’t understand an investment, you have no conviction about an investment. Using my bitcoin example, if the price of bitcoin dropped 30% from where it is at, I would not know if I should sell or buy more. When the stock market drops by 30%, I know that buying more is the right thing to do.
Conclusion
To be a superior investor:
Understand every investment you own
Measure performance annually and compare to benchmarks
Focus on five-, ten-, and twenty-year returns
Evaluate short-term results only relative to expectations and benchmarks
Demand long-term data before adopting any strategy
Don’t get influenced by stories or themes or prognostications when investing. If someone is pitching a story that sounds good, always ask for the data. How did this strategy perform over the last 20 years? How did it perform in bull markets or bear markets? How did it perform compared to other investments?
If the person pitching the story can’t answer those questions, move on.
If you want an investment strategy that is all about results and data, you should check out my Growth & Safety investment system. I know exactly how my strategy would have performed in World War II, the Great Depression, the Stagflation of the 1970s, the Great Recession of 2008 and any other period. I can tell you and show you exactly how and why it beats the results of the S&P 500 in the long run.
You can book time on my calendar to learn more by Clicking Here.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Things have not changed much in the last month. The stock market has basically been flat and the same factors are driving the day-to-day reactions and overreactions.
The chart below shows the price trends for the S&P 500 and the Nasdaq since the end of October 2025.
Prices are basically flat from the end of October until now. The S&P 500 is almost exactly flat with the highs reached last October and the Nasdaq is down about 4%. We describe this situation as the market being stuck in a trading range.
In the chart you can also see the large daily price swings. There have been several moves of 2% or more in both directions as the market is searching for a trend.
This flat market follows the huge gains posted from late April through late October last year. The S&P gained over 30% during that run and the Nasdaq gained over 40% over those six months. The fact that the previous surge has stalled out is not unusual as markets need to pause to digest the huge gains.
The AI/technology trade is one of the factors causing the daily and weekly price swings. AI capital spending continues to drive the overall economy, but the market is not certain yet about the expected returns on those investments. Recently, the market has been punishing industries expected to be hurt by AI – software companies and some financial services companies.
Unfortunately, the recent news on tariffs means more uncertainty for the market and for companies and for the economy.
Economic data continues to be mixed. Employment data has been volatile – good one month and bad the next. Inflation continues to run above the Fed’s goal of 2% but it has been stable.
If job losses accelerate, we can expect some modest rate cutting from the Fed. Fed cuts will minimize the impact on stock prices from an increase in unemployment.
Corporate earnings growth continues to be strong – above historical averages. Corporate earnings growth needs to stay above average to sustain the high stock market valuations.
My stock market valuation gauge indicates that the stock market (S&P 500) is still about 25% above its fair market value. Short of some news about big productivity increases from AI, it will be difficult for stocks to climb much higher at these valuation levels.
I do not trade based on market valuation levels and you should not either. It is just a reminder that you need a strategy in place to protect your savings in case we experience a bear market. Older investors in particular need loss protection during stock market downturns.
My investing system comes with built-in loss protection. It is designed to avoid most of the losses in bear market meltdowns. But it also produces big gains in bull markets. You can now invest in my system directly from your brokerage account. Click on this link to get on my calendar to learn how to start using my Growth and Safety fund.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Updated: Feb 18
Buy low and sell high has been the mantra for stock market investing forever. It makes sense, right?
If we get into the stock market at a low point and sell when stock prices are much higher, we can lock in those gains.
This saying applies well to buying individual stocks but not so much for stock index funds.
Most of you know by now, that individual stock pickers are not able to beat the performance of a simple S&P 500 index fund. Why spend all the time and effort associated with managing a stock portfolio made up of individual stocks when you can get better investment returns by simply owning the best index funds?
With index funds, the industry experts tell us to buy and hold these funds forever. Other than dollar cost averaging into the fund, there is not an opportunity to buy low and sell high.
THE BUY AND HOLD STRATEGY
A core principle supporting the mediocre investing strategies of the financial services industry is “Buy and Hold.” Advisors argue that since the stock market always goes up in the long term (very true) that we all must simply “ride out” the bear market crashes and wait for the eventual rebound or recovery. I like to call this the “Buy and Hold and Suffer” strategy.
Buy and hold is a form of disciplined investing, as opposed to emotional investing, and I must acknowledge that disciplined investing is a good thing. Fear, if not held in check by discipline, causes people to buy into the equity markets at the top (fear of missing out) and sell at the bottom (fear of getting wiped out). This is consistently the worst mistake that most stock market investors make.
So, buy and hold is an improvement over the worst possible investing strategy—but should we settle for “better than the worst”?
The other benefit of buy and hold investing is that it teaches people to think long-term for their stock market investments. Buy and hold is a strategy for the long term. Many people mistakenly focus too much on short-term results from their stock market investments.
Simply “riding it out” does nothing to alleviate the financial or emotional suffering from bear market collapses. To watch your savings drop by 40% in a matter of months is extremely painful. Waiting six or seven years for your investment portfolio to get back to break-even could destroy your retirement plans, particularly for older investors.
The financial services industry has offered no viable solutions to the bear market problem. Their asset allocation approach offers very little downside protection in stock market downturns. Bonds lost as much money as stocks in 2022. And individual stock portfolios often lose more money in big declines than the broad stock market (S&P 500).
The S&P 500 Index is THE benchmark for investment performance. The S&P 500 has produced average annual gains of 10% per year over the last 100 years, 50 years, 30 years and 20 years.
While the long-term returns of the S&P 500 are excellent and consistent, the annual results are anything but consistent. The stock market is highly volatile. The market can drop by as much as 50% in a downturn.
Most investors can’t stomach these kinds of losses, so they are forced to invest in conservative investments like bonds that generate low growth rates.
A BETTER WAY TO INVEST
Most of you know by now that my Growth and Safety investing system utilizes the best index funds and that it sidesteps the ugly bear markets.
The industry has never offered an effective way to do this, so I was forced to create one. It was not easy, but I love a challenge.
My system is a data-driven computer model using millions of data points spanning 100 years of stock market history.
The model uses probabilities to measure stock market risk levels on a daily basis.
When the model detects changes in risk levels or changes in market cycles, the investment strategy adjusts accordingly.
The Growth and Safety system uses data over feelings and probabilities over predictions. Emotions are your enemy when it comes to investing. Markets are irrational in the short term which makes them impossible to predict over the next month, season or year.
When the stock market is in a growth cycle which is the case most of the time, we invest aggressively in these index funds. When risk levels become elevated, we start moving out of the stock market and into conservative interest-bearing assets like money market funds and treasury bills. And when the “coast is clear”, we begin moving back into the stock market.
The stock market moves in two distinct cycles – a growth cycle and a bear market decline cycle.
The good news is that the stock market is in a growth cycle most of the time (86% of the time). In the growth cycle, the S&P 500 posts annual gains of around 17% - much higher than its long-term average of 10% per year.
The bad news is that in the bear market decline cycle produces annual declines or around 37%. Even though the bear declines only represent 14% of market trading days, they are extremely painful.
Comparing my Growth & Safety system’s performance to the S&P 500 in the growth and bear decline cycles shows you why and how my system posts such strong results.
Losing less in major market declines generates higher overall returns. It is simple math.
My model can outperform the S&P 500 in growth cycles because we selectively use higher growth index funds like the Nasdaq-100 when the market is in a strong growth cycle.
GROWTH | BEAR | ||
CYCLE | DECLINE | AVERAGE | |
86.0% | 14.0% | ||
S&P 500 | 17.5% | -36.0% | 10.0% |
MY SYSTEM GROWTH & SAFETY | 19.0% | -11.0% | 14.8% |
Because losses from the Growth and Safety system are much smaller, recovery times are faster. A 10% loss requires an 11% gain to get back to even while a 40% loss requires a 66% gain.
My clients are very happy with the high investment returns, but I think they appreciate the Safety part of my system even more. Having peace of mind that your life savings are protected allows retirement investors to sleep better at night.
SELL HIGH AND BUY LOW
Not only does my system avoid big losses, in most bear markets my system makes a profit from the volatility.
The 2020 Covid crash was the perfect scenario for my Growth & Safety model. The S&P 500 started dropping in late February and hit bottom in late March after falling about 34%. The trend reversed quickly at the end of March and gained back all those losses by late August.
My Growth & Safety model started getting out of the stock market on February 24th and was completely out of the market on February 28th – avoiding most of the big losses that happened in March.
The sales to get out of the S&P 500 index fund (IVV) happened at prices between $323.83 and $295.81. After the S&P 500 reversed course in late March and climbed back to $275.00 on April 8th, my system triggered a buy to get fully back into the market.
We sold high and bought back in at a lower price – making a profit as a result. This is how my approach uses the “buy low and sell high” mantra in reverse. It is great avoiding the large losses that happen in severe bear markets, but it is even better when you can turn that volatility into a profit.
To keep the 2020 analysis simpler, I compared the S&P 500 results to my system using only the S&P 500. Since technology stocks were doing so well in 2020 (everything going online due to Covid), my model was also invested in the Nasdaq-100 (QQQ). As a result, the actual results for 2020 from my investing system were much higher.
Because we sold our stock investments at a higher point early in the downturn, we had a much higher level of cash to buy back in at the lower prices. When you ride the collapse all the way to the bottom, you don’t have any extra cash to buy back in at the lower prices. In fact, you have much less money which means you need huge percentage gains to get back to break even.
As a result, my Growth & Safety system posted a 30% gain for the year 2020 compared to the 16% gain for the S&P 500 (not including dividends).
The concept is very simple. The math and the algorithms that support the model are quite complex.
Many others have tried to do this, but I have not found any with appealing results. The others use a variety of approaches, but they typically rely on standard industry trending statistics that are based on moving averages (MACD, RSI, etc.).
My analysis proved that using standard moving averages is not effective. I was forced to create my own trending and momentum statistics to make my model work. It was a tremendous amount of work to create my own proprietary momentum variables, but it was well worth it.
SUMMARY
The investment services industry leaves you with a limited set of mediocre investment options and they charge high fees for these poor solutions.
Cycling through financial advisors will not get you anywhere. Some people go through three or four different financial advisors and still end up with mediocre investing results.
Despite what the industry has told you, you can have Growth AND Safety when it comes to your retirement investments.
You do not have to settle for mediocre 6% to 7% returns, nor do you have to endure devastating losses by simply “riding it out” during markets crashes. Most people know intuitively that the “Buy & Hold & Suffer” strategy doesn’t make any sense.
It is possible to get higher investment returns and lower your risk.
By potentially doubling your investment returns, you can dramatically increase your income in retirement – without taking on more risk.
If you think you and your family could benefit from higher returns and less risk, schedule an appointment by clicking on the link below
The purpose of the call is to explain how you can start improving your investment results right away and to see if my system is a good fit for you. We will provide more information about this better way to invest and answer all your questions.
There are a couple of ways that you can utilize my Growth & Safety system right from your own brokerage account. You don’t have to send your money to some advisor you don’t know. You maintain complete control of your money.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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