What is a realistic return on value investing?

Just did up my annualized return per year. Note that I did not keep detailed records for 2005 and 2006, or I would have included them.

2007 +89%
2008 -59.8%
2009 +98.2%
2010 +25.1%
2011 -5%

5-Year CAGR +9.6%

YTD 2012 +14%

The above includes dividends received.

(26-06-2012, 02:45 PM)swakoo Wrote:

(26-06-2012, 01:57 PM)Musicwhiz Wrote: Most people should be happy with a 7% to 8% return, consisting of 2-3% capital gains and 4-5% dividend yield.

Looking at the STI chart I posted earlier, over the past 20 years, STI cagr is about 3.5% (capital gains only) so above statement is realistic.

So, what's your CAGR? Have you gone to paint the town red? I only have some vague memories about certain target to be hit before you do that.

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(26-06-2012, 03:15 PM)Musicwhiz Wrote: Just did up my annualized return per year. Note that I did not keep detailed records for 2005 and 2006, or I would have included them.

2007 +89%
2008 -59.8%
2009 +98.2%
2010 +25.1%
2011 -5%

5-Year CAGR +9.6%

YTD 2012 +14%

The above includes dividends received.

Looks great! Too bad I'm too lazy to back track and compute my CAGR as there're just too many entries to sort thro' (downside of my regular switching activities).

Hi KopiKat,

A few observations though - I computed using an XIRR formula in Excel, using additions and subtractions from portfolio, so not sure how accurate this is. I should have used an NAV approach but it's really beyond me LOL!

The returns assume dividends received were not reinvested (i.e. static dates of receipt of dividends).

STI 5-year return was -1.9% CAGR (excluding dividends though):-

1 Jan 2007 - 2,918.63
31 Dec 2011 - 2,646.35

(26-06-2012, 06:10 PM)Musicwhiz Wrote: Hi KopiKat,

A few observations though - I computed using an XIRR formula in Excel, using additions and subtractions from portfolio, so not sure how accurate this is. I should have used an NAV approach but it's really beyond me LOL!

The returns assume dividends received were not reinvested (i.e. static dates of receipt of dividends).

STI 5-year return was -1.9% CAGR (excluding dividends though):-

1 Jan 2007 - 2,918.63
31 Dec 2011 - 2,646.35

This numbers are very impressive indeed. I believe with reinvested dividend in, the numbers will look even better =p

(26-06-2012, 03:15 PM)Musicwhiz Wrote: Just did up my annualized return per year. Note that I did not keep detailed records for 2005 and 2006, or I would have included them.

2007 +89%
2008 -59.8%
2009 +98.2%
2010 +25.1%
2011 -5%

5-Year CAGR +9.6%

YTD 2012 +14%

The above includes dividends received.

Could I ask how do you calculate the CAGR? Is this realised or unrealised returns? If it is unrealised returns, do you add in the dividends for the calculation? If yes, then wouldn't it be inaccurate to add unrealised and realised returns (i.e. dividends) together? I believe my 2 full-year return is not enough to do a CAGR. I am waiting for another 3 more years to calculate my CAGR. Didn't you buy in other stocks in this 5 years? If yes, how would your calculations be accurate?

(26-06-2012, 07:04 PM)Some-one Wrote: Could I ask how do you calculate the CAGR? Is this realised or unrealised returns? If it is unrealised returns, do you add in the dividends for the calculation? If yes, then wouldn't it be inaccurate to add unrealised and realised returns (i.e. dividends) together? I believe my 2 full-year return is not enough to do a CAGR. I am waiting for another 3 more years to calculate my CAGR. Didn't you buy in other stocks in this 5 years? If yes, how would your calculations be accurate?

I use Excel's XIRR function, which adjusts for returns over a specific time period. It also adjusts for withdrawals and additions to a portfolio (-ve and +ve respectively). Start with a -ve value and end up with a +ve one, or you can read up tutorials on XIRR usage. Basically you need to include all transactions within the time period, including additions, dividends and subtractions. This accounts for realized gains and organic growth of the portfolio as well.

The unrealized gain remains in my portfolio, but the XIRR accounts for the growth of the portfolio as well since you take the market value, so it is a total return (adjusted for dividends and unrealized gains). As far as I know, it's pretty accurate.

(26-06-2012, 05:52 PM)KopiKat Wrote: So, what's your CAGR? Have you gone to paint the town red? I only have some vague memories about certain target to be hit before you do that.

CAGR with or without injections/withdrawals? over what time frame? adjusted for inflation? investment portfolio only or total assets? The cleanest way will be using NAV which I just learnt about these few days reading the postings here and all the links provided. Would have to recompile my raw data using this approach, have to reserve this task for when I have a big spare block of time (and my curiosity gets the better of me).

Suffice to say I was lucky that I started intensifying my investments around same time as you in 2003 at the start of the massive bull run which ran till 2007. So even with the wild ride in 2008, my overall CAGR based on my own customised calculations (using big spreadsheets) is very satisfactory to me.

Yes, I can't remember what we said about painting the town red too. But riding the big bull/bear market over this period was an excitement in itself. As exciting as the one in 1998/99 though my scale then was very much lower.

(26-06-2012, 11:19 PM)swakoo Wrote: CAGR with or without injections/withdrawals? over what time frame? adjusted for inflation? investment portfolio only or total assets? The cleanest way will be using NAV which I just learnt about these few days reading the postings here and all the links provided. Would have to recompile my raw data using this approach, have to reserve this task for when I have a big spare block of time (and my curiosity gets the better of me).

Haha.. I see you have the same 'problem' as quite a few of us here. Perhaps during 'Job week', we can hire some scouts to do that for us since kids are nowadays very computer savvy.. Hee..

Quote:Suffice to say I was lucky that I started intensifying my investments around same time as you in 2003 at the start of the massive bull run which ran till 2007. So even with the wild ride in 2008, my overall CAGR based on my own customised calculations (using big spreadsheets) is very satisfactory to me.

I'm very glad to hear that!

When I looked at my own normalised data, my asset growth was slightly lagging behind STI growth from 2003-2005. It only started to out-perform STI from 2006. By then, we'd been hit by the big drop in 2008, so my out-performance meant a smaller drop, Haha..

So, I didn't get to 'enjoy' as much of the initial bull run and the key reason I got to enjoy more of it later is very likely due to my major change in mindset and treating investing as a viable rice-bowl alternative. Ya, thx to the many gurus from Wallstraits forum (incl. mxxx) and Warren Buffett / Peter Lynch (via books) for their guidance!

Quote:Yes, I can't remember what we said about painting the town red too. But riding the big bull/bear market over this period was an excitement in itself. As exciting as the one in 1998/99 though my scale then was very much lower.

1998/99 was a very different experience for me. The STI decline from 1996-98 was as bad as the 2008 one. Even tho' %-wise, it was slightly lower, the duration makes one feel like being slowly strangulated to death (if one is not happily buying more of the same stocks at an ever cheaper price). It was terrible to see my stocks assets drop so much. When I bought my current property in 1998, I didn't have enough cash to do the down-payment and couldn't bear to sell my stocks. I ended up borrowing cash from my family members (1st and only time in my life - not a very good feeling to be indebted) while I waited for the market recovery that fortunately came along in 1999. Yes, what a recovery (+78%)! I spent 1999, happily selling my stocks and clearing my entire debt. Needless to say, I ended up with almost zero cash... again! On hindsight, perhaps a good thing for me as STI was -ve again from 2000-2002!

(26-06-2012, 03:15 PM)Musicwhiz Wrote: 2007 +89%
2008 -59.8%
2009 +98.2%
2010 +25.1%
2011 -5%

5-Year CAGR +9.6%

Assuming u start with $1 equity in 2007, at the end of 2011, u will get:

$1 x 1.89 x .402 x 1.982 x 1.251 x .95 = $1.79

Taking the 5th root of 1.79, we have:

1.79 ^ (1/5) = 1.123

ie. 12.3% compounded return.

Might u have understated your CAGR? Thx.

Question..
Is idle cash being taken into consideration of your portfolio performance?
I think this will impact the return rather significantly especially if the cash is above 20% of your entire asset.