The Trimark Mountain Chart Is Back:

Just when you think the Trimark mountain chart is gone – thanks to the 2008 global financial crisis – this “thing” appears to-day in the Globe And Mail – Report on Business page B3. Invesco (or Trimark) use the mountain to illustrate how well investors have done from inception – to date using a buy-and-hold reinvestment of distributions strategy in the Trimark Fund Series SC  According to Trimark – “The Fund is a core global equity investment that can diversify a portfolio and potentially enhance returns. The MER is 1.72% and the current number of holdings is about 39.

The problem is that Trimark’s linear scale “mountain chart” suggests to the eye that newer investors are doing better than older investors – a compelling message that may influence confused investors during RRSP season.

The “illusion” is created by Trimark’s use of a linear (arithmetic) scale instead of a proper per-cent or semi-log scale. According to StockCharts.com - :Linear (Arithmetic) Scaling: On a linear (arithmetic) scale chart, the spacing between each point on the vertical scale is identical. Thus the vertical distance between 10 and 20 is the same as the vertical distance between 90 and 100. While this kind of scaling is intuitive and easy to recreate by hand, linear scaling should not be used on charts with large vertical ranges. A move from 10 to 20 is much better than a move from 90 to 100, but on a linear scale they both appear the same.”

Most technical analysts I know always use a semi log scale if the price on the vertical scale doubles – the U.S. based Market Technicians Association recommend a semi log scale if the price on the vertical scale changes by a third.

To illustrate my point I am using the SPDR Dow Jones Industrial Average ETF Trust (DIA) that seeks to provide investment results that correspond generally to the price and yield performance of the Dow Jones Industrial Average. The MER is 0.17% and the number of holdings is 30. By the way the DIA outperformed the Trimark Fund over 5, 10 and 15-yr periods

The first chart is the Trimark Linear scale world where newer investors – in the eleven year window since the lows of 2003 seem to do better then the older investors in the eleven year window of 1992 to the lows of 2003.

The second chart is the Real World semi log scale world where the older investors have - in reality – done better than the newer investors.

Trimark’s motto is “Knowing pays” – so to know more why not e-mail them at inquiries@invesco.ca or call at 1.800.874.6275.