During our first ten years iDayo™ averaged returns of 50% per stock per year. But by the end of 2008, our 11th year, that average had dropped to 43%. With the general market down more than 40%, it wasn’t surprising that we weren’t able to maintain a higher average return, but it was disappointing nonetheless. But we were proud that, just like in the 2000 to 2002 Bear Market, the system protected out Members.

To arrive at our average stock returns we first annualize the return on each stock sold, then average the returns on all the stocks bought during the period. To make this clear, let’s look at the difference between an “annualized” return and a “compounded” return.

To produce an annualized return, the amount invested in each stock would have to be the same. In other words, all profits from the sale of a stock are removed from the account following the sale, and the original amount of money is invested in each subsequent stock. In this type of investing, the profits from one sale are not compounded, or “rolled into” the next investment. Very few people invest this way. Normally retirees who live from the proceeds of their investments would use this method.

The method to determine an annualized gain is to multiply the percentage of return per period by the number of periods in a year. The result is the annualized return. Thus, an investment making 5% per month would have a 60% annualized return (5% X 12 months). One making 10% per month would return 120% on an annualized basis.

The great majority of investors do their investing on a compounded basis. This method adds the gains from a previous stock sale or a period of time to the original amount of money, making more money available for the next stock purchase or period of time. So the compounded return for an investment making 5% profits per month would be 79.5%; for an investment returning 10% per month it would be 213.8%.

Most companies that offer investment services show only their compounded returns. We choose to use the more conservative annualized returns on our website. Even though we realize that few people invest this way, there are definitely some people who do so. All charts showing our yearly returns are expressed in annualized terms, even though showing the compounded returns would be more impressive. We prefer to under-promise and over-deliver.

When you look at the returns of our stocks, be aware that they are not annualized or compounded. These are the actual returns during the 16 week period they were held. In order to get an idea of what your yearly return would be on such investments, you can annualize the 16 week return. Using the method described above, you would multiply the percentage return by the number of periods in a year. Since 52 weeks (one year) divided by 16 weeks (our typical holding period) equals 3.25, you would multiple the percentage return of the 16 week period return by 3.25 to obtain the annualized return.

For example, if a weekly group of stocks closed with a 20% return for the sixteen weeks, you would multiply 20% by 3.25 for a 65% annualized return. That means that if you made exactly that amount on every folio, your annualized return would be 65% every year. Obviously that will never happen, so the yearly annualized returns you see in our Track Record are averages of all the stocks bought that year. Note that there are two dates beside each stock: the date opened (or bought) and the date closed (or sold). We follow the industry-accepted practice of calculating our returns based on the year in which the stocks are bought. The average 16 week return of all of our stock selections for the 11 year period starting in January, 1998 and ending at the end of December, 2008, was 13.23%. This was the average return of all stocks, including winners and losers. Multiplying this return by 3.25 gives us an average annualized return per stock of 43%.

The average of the average annualized returns per year for the 11 year period is slightly less than 43%. But in some periods in our history the average of the years has been somewhat greater than the average of all the stocks. What is the reason for this discrepancy? Simply that the number of stocks selected varies with the year.

There are actually three ways in which we could quantify the overall return of our system: 1) The average of the returns of all the stocks bought each month; 2) The average of the average annualized returns for each year; or 3) The average of the annualized returns per stock for all stocks selected.

Averaging the monthly returns would be the least accurate, since the number of stocks selected varies from month to month. We have normally have no fewer than nine and no more than thirteen stocks per month, with an average of ten. Were we to invest $5,000 each month, we would invest $550 in each stock when there were nine selections, and $385 per stock in months when there were thirteen. This would have the undesirable effect of overweighting some stocks and underweighting others, making this a poor measure of performance.

Averaging the years would be more accurate, but only marginally so. The problems of the overweighting of some stocks and the underweighting of others would remain. This is due to the fact that over the years we have had a wide variance in the number of stocks selected per year. So, if one were to follow the system as it was designed, and put equal amounts of dollars in every stock, in some years far more money would be invested than in others. Therefore, some years would be unequally represented in an average of years.

By far the most accurate measure of the system’s performance is the average annualized return per stock. By calculating equal dollars invested in each stock, and by annualizing both profits and losses, we obtain a reliable measure of system performance. Instead of averaging the average of 11 years’ returns, or of 132 months’ returns, we average the returns of over 1,500 stocks. Interestingly, the average return per stock has stayed within a tighter range year after year than has either of the other averages. This reinforces the superiority of this measurement.

Members are, of course, welcome to utilize which ever measurement of the system’s performance they feel is most appropriate. Unlike the great majority of investment websites, we make all our data available, so any type of research is easy to accomplish. Many first time viewers of our website have gone out of their way to compliment us on our openness and transparency.

$10,000 Initial Capital