If I were to ask you which one performed better since 1986, would you tell me Bill Miller-managed Legg Mason Value Trust or the S&P 500 Index, which one would you pick?
If you picked Value Trust you’d be…
Much was made about the end of Bill Miller’s 15-year streak of beating the S&P 500 Index a few years ago. Fifteen years of consecutively beating the index is a pretty mean feat. But, as you can see from the graphic below, a 15-year streak can go down the drain quite quickly with a few years of underperformance:
Notice that those numbers INCLUDE 2009’s performance through October 20th. In other words, even including 2009’s performance, Mr. Miller is STILL trailing the S&P 500 Index since 1986.
One other interesting thing to note is the difference between the average returns and the geometric average returns. If you’ll notice that average returns are neck-in-neck between the two. But, the geometric averages are vastly different. This is due to the fact that Value Trust is a highly volatile mutual fund. It has years of great performance and years of really bad performance. In other words, it’s a much bumpier ride on the Value Trust train than on the S&P 500 Index train.
Once again, this just proves how hard it is to beat the index on a long-term consistent basis and the risk that investors take when pursuing such performance.