So, how are your investments doing?
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Location: Western Hemisphere
Posted on: 04-11-09 15:04:03
With the roller coaster ride of the TSX and the DJIA (the two I care about) in the past few days, how are your investments doing? I am a long haul investor, so not very worried about these bumps.
Looking over a period of 10 years, I've had a decent portfolio return of 14% with respect to out of pocket investment. With respect to the adjusted cost base (accounting for all the re-investment of the distributions), the return is minus 1%. I'd like to see that go up to 7 to 10%.
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Dimple2001
Quote:that is annualized return or total?
Originally posted by dimple2001
Looking over a period of 10 years, I've had a decent portfolio return of 14% with respect to out of pocket investment.
If it is annualized do you mind sharing your investments or asset allocation?
14% is a great return and i'm sure others will also be interested to know how you achieve that?
Location: Western Hemisphere
Posted on: 04-11-09 16:23:32
Quote:
Originally posted by captainbeam
that is annualized return or total?
If it is annualized do you mind sharing your investments or asset allocation?
14% is a great return and i'm sure others will also be interested to know how you achieve that?
Hmmm...let me say this way. Since 10 years until now, I have been investing little bit at a time for a total of $B until today. Today, the market value is $A. Return is (A-B)/B x 100. I called it Return on Invested Amount.
So, help me out, would that be total return? I know it's a simplified calculation. I was one day curious to find out how much went off my pocket and what's my investment worth.
Asset allocation - 70% equities, 24% fixed income and 6% cash/cash equivalents.
I am not sure if 14% is great. I would like to see the following to be more than 10% (maybe too optimistic?):
Out of pocket money invested $B, re-invested earnings - $C, Market Value - $A
(A -(B+C) ) / (B+C). I would call it return on cost basis. Right now, this return is negative 1%.
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Dimple2001
If it is 14% per year compounded then you rank among the likes of Peter Lynch. If it is 14% total over 10 years then its 1.3% per year compounded which is mediocre and does not beat inflation.
Quote:That calculation is normally called cumulative return and does not indicate true performance of a portfolio.
Originally posted by dimple2001
Hmmm...let me say this way. Since 10 years until now, I have been investing little bit at a time for a total of $B until today. Today, the market value is $A. Return is (A-B)/B x 100. I called it Return on Invested Amount.
I think what captainbean is referring to is the geometric mean returns or annual return, and not the average return.
Quote:In your case, it is slightly harder to calculate because you have periodic contributions. You need to take into account the date of contributions as well as the date of re-invested distributions.
So, help me out, would that be total return? I know it's a simplified calculation. I was one day curious to find out how much went off my pocket and what's my investment worth.
I believe it's called Annual Internal Rate of Return (IRR).
http://en.wikipedia.org/wiki/Internal_rate_of_return
Some brokerages provide the same and call it Personalized Rate of Return.
If you have a Group RRSP or a DCP Plan, your fund company might be providing you this number annually.
Quote:Yeah, these days a 10% annualized return can be considered awesome.
I am not sure if 14% is great. I would like to see the following to be more than 10% (maybe too optimistic?):
Quote:So that formula is assuming that B and C were done on 1st Jan.
Out of pocket money invested $B, re-invested earnings - $C, Market Value - $A
(A -(B+C) ) / (B+C). I would call it return on cost basis. Right now, this return is negative 1%.
To get the true annualized return, you need to factor in the date of investment.
To get the value on calculation date, you have to do:
=Amount of contribution or distribution * (1+Rate of Return)^(Number of Days from Investment till today / 365)
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Location: Western Hemisphere
Posted on: 04-11-09 21:15:53
Good discussion. Thanks for the responses.
Mine is a very simplified calculation. I realized it will not reflect the absoluely accurate returns for 2 reasons (similar to what patrickm stated) - I have several investments and every one of those receives several deposits during the year.
IRR will be a good way to capture each of those cash flows, except that, it's hard for me to go back and track down all the dates....too cumbersome to spend my time, although not impossible.
Also, there are few investments that I started within the past 2 years and then several within past 10 years....that adds to the complexity.
That's why I resorted to adding all the $ I invested and compare to Market value as of certain date. I realize it doesn't take into account the time value.
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Dimple2001
Location: Western Hemisphere
Posted on: 05-11-09 07:44:49
Quote:
Originally posted by newton
If it is 14% per year compounded then you rank among the likes of Peter Lynch. If it is 14% total over 10 years then its 1.3% per year compounded which is mediocre and does not beat inflation.
I guess neither. Based on patrickm (which I tend to agree), it's cumulative return without accounting for the time value.
I'll research more and post more details on the returns, maybe I can get further input from all of you.
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Dimple2001
