Some people watch baseball and do line scoring. Others keep score with box scores. Line score is similar to single bottom line accounting. Box score is like triple bottom line accounting. How do you keep score of your financial returns? How do you keep score of the way the game was played?
Keeping score using line score, or single line accounting, measures returns only. $100 goes in and $125 comes out. Financial wizards can measure financial returns with great precision. They can even measure the amount of risk taken for the return. But at the end of the game it is a line score. What is harder to measure is how the game was played, how the returns were made. If you want to really understand the dynamics of a specific game you use box scores. This brings much more depth to the story of the game, or the investment.
We know Portfolio 21, a mutual fund, returned 2.99% annually, over the last five years as of Dec 31, 2010. We know The Vice Fund, also a mutual fund, returned 2.43% annually, for the same time frame. Very similar returns as seen from the line scores.
Let’s look at the box scores. What companies do they look at to invest in?
“The Vice Fund invests in companies, both domestic and foreign, engaged in the aerospace and defense industries, owners and operators, gaming facilities as well as manufacturers of gaming equipment, manufactures of tobacco products and producers of alcoholic beverages.” www.usamutuals.com/vicefund
“Portfolio 21 invests in companies designing ecologically superior products, using renewable energy, and developing efficient production methods. Portfolio 21 companies seek to prosper in the 21st Century by recognizing environmental sustainability as a fundamental human challenge and a tremendous business opportunity.” www.portfolio21.com/
The box scores add a deeper understanding of the game. Triple bottom line accounting adds a deeper understanding of the investment.
How are you keeping score of your investments? Are you measuring success by dollars only? Isn’t wealth more than cash in the bank? Returns at any cost, certainly not. We can each use our own values and beliefs to decide what is important to measure, but we should be measuring more than the simple return.