What is a realistic return on value investing?

(26-01-2015, 11:21 PM)corydorus Wrote:

(26-01-2015, 11:04 PM)CityFarmer Wrote:

(26-01-2015, 09:16 PM)corydorus Wrote: Not going to quote the whole thread again. My point is you are choosing the year of low to make your point.

If i choose early 2000 (peak) as entry to 2015 (peak) , that's 15 years apart where you have only 2% returns annualized

And to achieve 18% returns annualized between 2000 - 2015, S&P needs to be at 18000 point at Year 2015.
S&P500 current is at 2051 only.

I quoted the year, 1993, because you highlight "last 20 years", since the data ended with 2013, 1993 happen to be the starting of "last 20 years"

It has proven that we do indeed have different brain frequency

I think we have classic out of context ....

I do sync on the last statement.

We might have talked on different things totally. Never mind, it happens some time, even for face-to-face discussion.

(26-01-2015, 11:44 PM)cif5000 Wrote: Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.

An individual result, should be aggregated result from method used, skill (includes experience), and effort, IMO.

(27-01-2015, 09:28 AM)CityFarmer Wrote:

(26-01-2015, 11:44 PM)cif5000 Wrote: Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.

An individual result, should be aggregated result from method used, skill (includes experience), and effort, IMO.

Exactly my point, isn't it?

1. Realistic return should not be merely the market return.

2. Realistic return from value investing should not just come down to a nice round number. It can only be a range and this range is HUGE. The reason being it huge is not because of the method but because of the person who uses the method.

(27-01-2015, 09:23 AM)CityFarmer Wrote:

(26-01-2015, 11:21 PM)corydorus Wrote:

(26-01-2015, 11:04 PM)CityFarmer Wrote:

(26-01-2015, 09:16 PM)corydorus Wrote: Not going to quote the whole thread again. My point is you are choosing the year of low to make your point.

If i choose early 2000 (peak) as entry to 2015 (peak) , that's 15 years apart where you have only 2% returns annualized

And to achieve 18% returns annualized between 2000 - 2015, S&P needs to be at 18000 point at Year 2015.
S&P500 current is at 2051 only.

I quoted the year, 1993, because you highlight "last 20 years", since the data ended with 2013, 1993 happen to be the starting of "last 20 years"

It has proven that we do indeed have different brain frequency

I think we have classic out of context ....

I do sync on the last statement.

We might have talked on different things totally. Never mind, it happens some time, even for face-to-face discussion.

I think in short Cory concurred with me that timing is important Even for value investing we do need to look at the catalysts and macro factors. Having a loaded gun ie be prepared is one thing... when to shoot is another.

(27-01-2015, 09:58 AM)cif5000 Wrote:

(27-01-2015, 09:28 AM)CityFarmer Wrote:

(26-01-2015, 11:44 PM)cif5000 Wrote: Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.

An individual result, should be aggregated result from method used, skill (includes experience), and effort, IMO.

Exactly my point, isn't it?

1. Realistic return should not be merely the market return.

2. Realistic return from value investing should not just come down to a nice round number. It can only be a range and this range is HUGE. The reason being it huge is not because of the method but because of the person who uses the method.

I think "realistic" here implies a comparison to fellow investors to know the "range"
If several other value investors get returns of 20%, for example, then 20% is a realistic figure for me. Not the ETF, S&P etc
Which is why I was curious about everyone's longer term returns
Of course, then we had another discussion on the time frame, which would change the figures drastically, but that is just a rough gauge for u to use. It's not a precise tool

(27-01-2015, 09:58 AM)cif5000 Wrote:

(27-01-2015, 09:28 AM)CityFarmer Wrote:

(26-01-2015, 11:44 PM)cif5000 Wrote: Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.

An individual result, should be aggregated result from method used, skill (includes experience), and effort, IMO.

Exactly my point, isn't it?

1. Realistic return should not be merely the market return.

2. Realistic return from value investing should not just come down to a nice round number. It can only be a range and this range is HUGE. The reason being it huge is not because of the method but because of the person who uses the method.

How about the "realistic return" is the min of the "huge range". The min return is to make an individual value investing journey feasible.

The "huge range" is huge over short term, but might not be too huge over longer term. Of course, we are referring to those real value investors, rather than self-claimed. Mr. Buffett's CAGR was ~20%, Yeoman Cap was ~14%, and passive ETFs are 8-10%, so the "huge range" of long term return may be less than 10%. It is huge as CAGR, but likely not the same scale as your definition of "huge".

(27-01-2015, 10:42 AM)CityFarmer Wrote:

(27-01-2015, 09:58 AM)cif5000 Wrote:

(27-01-2015, 09:28 AM)CityFarmer Wrote:

(26-01-2015, 11:44 PM)cif5000 Wrote: Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.

An individual result, should be aggregated result from method used, skill (includes experience), and effort, IMO.

Exactly my point, isn't it?

1. Realistic return should not be merely the market return.

2. Realistic return from value investing should not just come down to a nice round number. It can only be a range and this range is HUGE. The reason being it huge is not because of the method but because of the person who uses the method.

How about the "realistic return" is the min of the "huge range". The min return is to make an individual value investing journey feasible.

The "huge range" is huge over short term, but might not be too huge over longer term. Of course, we are referring to those real value investors, rather than self-claimed. Mr. Buffett's CAGR was ~20%, Yeoman Cap was ~14%, and passive ETFs are 8-10%, so the "huge range" of long term return may be less than 10%. It is huge as CAGR, but likely not the same scale as your definition of "huge".

Good that we agree on the first point that it should not be just the market return.

If you exclude the "self-claimed" and use only the "real value investors" you will commit selection bias and survival bias in populating the data. A realistic minimum return is a negative number (i.e. losses).

Short term is a huge range. So is long term. If you take 20-30 year and do an average, you should also compound the "few percentage difference" and look at the cumulative effect after 20-30 years. The range is huge!

I measure 'realistic' returns as beating inflation annually.
Ideally 50 percentage points and above.

Inflation rate = 4%
Returns = 6%

Anything more is bonus.

I believe there aren't enough value investors in this forum who have 10, 20 or 30 year records of their investing returns to compare with. Being a value investor is like being in a religion - you just mostly have faith that your long term results will justify your effort.

There's another way that I like to use for myself personally. Let's say you set a hurdle rate - the long term total return of the STI is one such starting point - e.g. 9%. Then you make 12% on your 1 million dollar portfolio. Is the extra $30k you made worth the time and effort you put in? Obviously if the STI went down that year, you want to lose less than the STI by a similar margin.

It is important that the hurdle rate you choose match the risk profile of your investments. If you are a low risk taker (with a matching portfolio), you should set the hurdle rate lower and vice versa.

(27-01-2015, 01:20 PM)tanjm Wrote: It is important that the hurdle rate you choose match the risk profile of your investments. If you are a low risk taker (with a matching portfolio), you should set the hurdle rate lower and vice versa.

My thinking is somewhat along this line but different.

If you do not want to put in the time and effort, you should set the expectation lower. Vice versa. Maybe that's what realistic is about.