WINNING INVESTMENTS with EXCHANGE-TRADED FUNDS

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Rolling 52-week Returns Comparison
Worldwide ETFs Portfolio System vs S&P 500 Index

Hypothetical Results
6.2 years : 327 weeks
June 20, 2002--December 26, 2008
Total % gains

(Dividends, Interest, and Transaction Costs exluded)

%

System

S&P500

average

37.7

6.6

max

80.0

39.6

min

-1.3

-44.5

stand dev

16.3

14.3

profit*

45.8

13.8

loss**

0.2

-0.6

* probability

1/3

1/3

** probability

1/93

1/3

Setting aside the issue of the validity and utility of statistics in the New Age, they serve here as a convenient way to profile sharply the comparison of two very distinct methods of approaching the stock market.

The table is easily read. Over six years (containing the ending of one bear market and the beginning--so far--of the next), the Worldwide ETFs system has produced an average return of 37.7% per year over all 52-week, rolling-return periods while the S&P 500 Stock Index has produced a comparable 6.6% per year.

The standard deviation for the system is a low 43% fraction of the average return (37.7 divided by 16.3). For the S&P 500, it is more than double the S&P's average return. The rest of the values in the table are based on arbitrary selections from areas under a standard normal curve. The 'probability' figures are read: 'The chances are one out of three'
or ' ... one out of ninety-three'. All the data in the top six rows are percent.

The data in the table pertain only to one specific slice of history. They have no relevance over time before that, or after. Time after is uncharted territory.
EMOTIONS
Human behavior has three factors: judgement, emotions, activity. The seat of judgement is reason. It is nominally in charge of the other two. Reason is presented continually and unendingly with observations for judgement. Every observation creates automatically an emotion. Emotion flavors and classifies the observation, labeling it good or bad, pleasant/unpleasant, happy/sad, attractive/repulsive, et cetera. The relation between judgement and emotions expresses as will, which launches activity.

Memory is a subfactor. It is the seat of imagination which provides an internal source of observations in addition to the external observations coming in through the senses. The field of observations is both conscious and unconscious, operating continuously.

This is the rich and complicated mixture whence your stock-market decisions derive.

The most vigorous and demanding factor is emotions. They are forcible, instantaneous, and abiding until overruled or valildated by reason. Further, they are contagious. The emotions of the individual multiply exponentially in a crowd. In a bull market, the emotions are buoyant. In a bear market, they are depressant.

Knowing this process gives you an edge over those who do not know it. The edge is the possibility of an increased weighting of your own judgment over your emotion in the mix whereby your will creates action or withholds it. This is a good thing in building a steady, consistent practice of anything, including especially rational participation in the stock market.

1/13/2009

Xworking/--3portf/ROLLTABL.XLS > rollstats.htm

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