What is a realistic return on value investing?

(28-06-2012, 03:11 PM)smallcaps Wrote:

(28-06-2012, 03:03 PM)swakoo Wrote:

(28-06-2012, 01:28 PM)freedom Wrote: How could the date the dividends received matter? to the whole portfolio (cash + investment as a whole), there is no cash inflow or outlow.

In Example 3 above, there is outflow so timing of dividend received (and taken out) matters.

Actually, the comparison was meant to be between example 1 and 2. It was to show that in the case whereby dividends are reinvested into the portfolio immediately, then there is no need to consider the outflow/inflow of dividends for XIRR

I agree. and to go one step further, as long as the dividends are not taken out, it should be considered as being invested immediately into cash balance. so dividends should never be considered unless it is taken out.

(28-06-2012, 03:15 PM)freedom Wrote:

(28-06-2012, 03:11 PM)smallcaps Wrote:

(28-06-2012, 03:03 PM)swakoo Wrote:

(28-06-2012, 01:28 PM)freedom Wrote: How could the date the dividends received matter? to the whole portfolio (cash + investment as a whole), there is no cash inflow or outlow.

In Example 3 above, there is outflow so timing of dividend received (and taken out) matters.

Actually, the comparison was meant to be between example 1 and 2. It was to show that in the case whereby dividends are reinvested into the portfolio immediately, then there is no need to consider the outflow/inflow of dividends for XIRR

I agree. and to go one step further, as long as the dividends are not taken out, it should be considered as being invested immediately into cash balance. so dividends should never be considered unless it is taken out.

Well, agreed but unfortunately I'm in the same portfolioless situation as KopiKat and have to assume that dividends were taken out and then reinvested with the next buy transaction.

(28-06-2012, 03:14 PM)swakoo Wrote:

(28-06-2012, 03:11 PM)smallcaps Wrote: Actually, the comparison was meant to be between example 1 and 2. It was to show that in the case whereby dividends are reinvested into the portfolio immediately, then there is no need to consider the outflow/inflow of dividends for XIRR

I see, yes QED - thanks.

The practical meaning for immediate re-investment of dividend is via scrip dividend scheme, but not all dividends are script dividend.

With the present value concept, dividends received at different time should have different value, thus affect the market value of your portfolio. XIRR result does not reflect that?

(28-06-2012, 03:38 PM)CityFarmer Wrote:

(28-06-2012, 03:14 PM)swakoo Wrote:

(28-06-2012, 03:11 PM)smallcaps Wrote: Actually, the comparison was meant to be between example 1 and 2. It was to show that in the case whereby dividends are reinvested into the portfolio immediately, then there is no need to consider the outflow/inflow of dividends for XIRR

I see, yes QED - thanks.

The practical meaning for immediate re-investment of dividend is via scrip dividend scheme, but not all dividends are script dividend.

With the present value concept, dividends received at different time should have different value, thus affect the market value of your portfolio. XIRR result does not reflect that?

I think that's already catered by the portfolio's cash holdings at the end of the XIRR period.

Btw, just to clarify that it's reinvestment into portfolio and NOT reinvestment into stock.

(28-06-2012, 03:49 PM)smallcaps Wrote:

(28-06-2012, 03:38 PM)CityFarmer Wrote:

(28-06-2012, 03:14 PM)swakoo Wrote:

(28-06-2012, 03:11 PM)smallcaps Wrote: Actually, the comparison was meant to be between example 1 and 2. It was to show that in the case whereby dividends are reinvested into the portfolio immediately, then there is no need to consider the outflow/inflow of dividends for XIRR

I see, yes QED - thanks.

The practical meaning for immediate re-investment of dividend is via scrip dividend scheme, but not all dividends are script dividend.

With the present value concept, dividends received at different time should have different value, thus affect the market value of your portfolio. XIRR result does not reflect that?

I think that's already catered by the portfolio's cash holdings at the end of the XIRR period.

Btw, just to clarify that it's reinvestment into portfolio and NOT reinvestment into stock.

Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

(28-06-2012, 04:02 PM)CityFarmer Wrote: Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

Actually it does cater for it in the final cash holdings. If the portfolio received the cash earlier then the cash would have earned a higher absolute return (assuming put in the bank) and the final cash holdings would be higher.

(28-06-2012, 04:15 PM)smallcaps Wrote:

(28-06-2012, 04:02 PM)CityFarmer Wrote: Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

Actually it does cater for it in the final cash holdings. If the portfolio received the cash earlier then the cash would have earned a higher absolute return (assuming put in the bank) and the final cash holdings would be higher.

But the XIRR will not able to accurately reflect the effect, since it does not have an entry of it.

I am trying hard to reach a point here i.e. we should include dividend as outflow, even it is re-invested into your cash holding. With the market value of the portfolio include cash holding at 1st entry and last entry, the XIRR result is more accurate.

(28-06-2012, 04:33 PM)CityFarmer Wrote:

(28-06-2012, 04:15 PM)smallcaps Wrote:

(28-06-2012, 04:02 PM)CityFarmer Wrote: Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

Actually it does cater for it in the final cash holdings. If the portfolio received the cash earlier then the cash would have earned a higher absolute return (assuming put in the bank) and the final cash holdings would be higher.

But the XIRR will not able to accurately reflect the effect, since it does not have an entry of it.

I am trying hard to reach a point here i.e. we should include dividend as outflow, even it is re-invested into your cash holding. With the market value of the portfolio include cash holding at 1st entry and last entry, the XIRR result is more accurate.

if dividends are considered outflow, have you really remove the dividends from your subsequent cash holding?

if yes, by all means, you should record it as outflow.
if no, you did double counting on dividends.

(28-06-2012, 04:33 PM)CityFarmer Wrote:

(28-06-2012, 04:15 PM)smallcaps Wrote:

(28-06-2012, 04:02 PM)CityFarmer Wrote: Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

Actually it does cater for it in the final cash holdings. If the portfolio received the cash earlier then the cash would have earned a higher absolute return (assuming put in the bank) and the final cash holdings would be higher.

But the XIRR will not able to accurately reflect the effect, since it does not have an entry of it.

I am trying hard to reach a point here i.e. we should include dividend as outflow, even it is re-invested into your cash holding. With the market value of the portfolio include cash holding at 1st entry and last entry, the XIRR result is more accurate.

Yes, if you wish to have the dividend entries there then you can add an outflow and immediately followed by an inflow of the same amount and date. It would result in the same XIRR

(28-06-2012, 04:36 PM)freedom Wrote:

(28-06-2012, 04:33 PM)CityFarmer Wrote:

(28-06-2012, 04:15 PM)smallcaps Wrote:

(28-06-2012, 04:02 PM)CityFarmer Wrote: Understood on re-investment part.

Does it mean XIRR does not cater for the timing of cash inflow into your cash holding? In other words, it make no diff either the cash holding is idle for 1 day or 365 days.

Actually it does cater for it in the final cash holdings. If the portfolio received the cash earlier then the cash would have earned a higher absolute return (assuming put in the bank) and the final cash holdings would be higher.

But the XIRR will not able to accurately reflect the effect, since it does not have an entry of it.

I am trying hard to reach a point here i.e. we should include dividend as outflow, even it is re-invested into your cash holding. With the market value of the portfolio include cash holding at 1st entry and last entry, the XIRR result is more accurate.

if dividends are considered outflow, have you really remove the dividends from your subsequent cash holding?

if yes, by all means, you should record it as outflow.
if no, you did double counting on dividends.

OK, i tried and it double count.

If the dividends are not recorded as an entry, and lump all into a single entry at the end of the list, does the result accurate?

So should i suggest that cash holding should not be include into XIRR function, just not to confuse it?