Cumulative return should be TWR, not MWR (default setting in IBKR).
So whether money is pumped in or not, can be double-edged sword:
- TWR < benchmark if bad decisions are made,
- TWR > benchmark if good decisions are made.
Since Adam Khoo's cumulative TWR (dark blue line 180%) > benchmark (SPX, green line 120%), that's basically good performance.
The return has to be judged in a context as mentioned above, cannot be judged in isolation.
After long and deep thought, I realise the below:
Regarding the peak value in 2021, he mainly add or rotates between holdings and don't go 100% cash at all, then it means he will NEVER realise the full value of the portfolio as cash in 2021.
So for this strategy of staying forever invested in markets, where supposedly it incurs less opportunity cost than buying and selling frequently (trading), the start and end point for evaluation has to be very long, i.e. decades. Example would be: start work and invest at 25 years old, retire at 55 years old (total: 30 years).
Then peak portfolio values in between actually don't really matter. Hence, it is fruitless for me to point out that the drawdown in 2022 is as large as the profits gained from Covid bubble since it will never become cash.
@d5dude, any comments about this as you are also doing something like this, staying fully invested while rotating between different assets?
