What is a realistic return on value investing?

(29-06-2012, 10:51 AM)Some-one Wrote:

(29-06-2012, 10:26 AM)smallcaps Wrote:

(29-06-2012, 10:19 AM)freedom Wrote:

(29-06-2012, 09:57 AM)smallcaps Wrote:

(29-06-2012, 09:46 AM)freedom Wrote: correct me if I am wrong, to use XIRR in excel, the time the money is injected into the portfolio is not important, but the time the money is deployed to buy something is very important.

As far as I understand, time of injection of capital is the important one and not when the capital was used to buy a stock. Because injection of capital already means the money is deployed (whether its held in cash or used to buy stock)

The time in which the stock is bought matters if we are measuring that stock purchase alone (and not on a portfolio basis)

if we are going to measure the portfolio like this, it means, we do not need to record any buy/sell/dividends transactions any more. the only things matter are: the time & money injected into the portfolio, the time & money taken out the portfolio and the initial and period end value of the portfolio.

am I right?

Yes, it sounds right to me and it should around the same rate as NAV method, I presume.

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(29-06-2012, 09:38 AM)Some-one Wrote: I am looking to track my portfolio return. Looking at this thread, I was wondering if I invest 50K at the start of 2010 and subsequently add more after getting my income, bonus etc. At the end of 2012, I would have probably invested 100K. If I use XIRR to track the returns, would it be accurate? Should we be tracking the return only on the 50K initial amount instead of the subsequent amount been added?

Yes, I think XIRR will be accurate as long as the subsequent capital injections are taken into account. Should not just rely on the 50k initial amount as it might distort the result by a lot, much like doing ROE computations without taking into account capital injections into the balance sheet

Thanks for the answer. Is CAGR the same as XIRR? CAGR is defined as Compound Annual Growth Rate. To me, it sounds like it is talking about growth rate but I am interested to know my annualised return of my portfolio including growth and dividend.

Yes, they are the same concepts. Just that CAGR normally does not cater for capital injections and thus we have IRR to do that for us. IRR is like a summation of multiple CAGR based on multiple capital injections.

Dividend is already catered for by both CAGR/IRR since the final value of the portfolio includes contribution from dividends

(29-06-2012, 09:50 AM)Temperament Wrote:

(29-06-2012, 09:38 AM)Some-one Wrote: I am looking to track my portfolio return. Looking at this thread, I was wondering if I invest 50K at the start of 2010 and subsequently add more after getting my income, bonus etc. At the end of 2012, I would have probably invested 100K. If I use XIRR to track the returns, would it be accurate? Should we be tracking the return only on the 50K initial amount instead of the subsequent amount been added?

i suggest you might solve your headache by trying out Microsoft Money. You can download it FOC. i don't know why it is discontinued by Microsoft. If you find it works wonderfully for you, then buy me a "coffee" by telling me you are happy using it. We are actually very lucky, it is a free software only after Microsoft decided to discontinue selling it. Sometimes one K is better than KK. MHO.

Which version are you using? Does the free version supports Windows 7 64 bit? The one that I have seen here does not support Windows 7.
http://microsoft-money-2008.en.softonic.com/

(29-06-2012, 11:52 AM)Some-one Wrote:

(29-06-2012, 09:50 AM)Temperament Wrote:

(29-06-2012, 09:38 AM)Some-one Wrote: I am looking to track my portfolio return. Looking at this thread, I was wondering if I invest 50K at the start of 2010 and subsequently add more after getting my income, bonus etc. At the end of 2012, I would have probably invested 100K. If I use XIRR to track the returns, would it be accurate? Should we be tracking the return only on the 50K initial amount instead of the subsequent amount been added?

i suggest you might solve your headache by trying out Microsoft Money. You can download it FOC. i don't know why it is discontinued by Microsoft. If you find it works wonderfully for you, then buy me a "coffee" by telling me you are happy using it. We are actually very lucky, it is a free software only after Microsoft decided to discontinue selling it. Sometimes one K is better than KK. MHO.

Which version are you using? Does the free version supports Windows 7 64 bit? The one that I have seen here does not support Windows 7.
http://microsoft-money-2008.en.softonic.com/

If you are using for the first time try to use the last version. Or experiment with the version that you can use. i am using the UK. 2005/2006 version. Actually i have captured all the transaction data since day one of my "trading" with Microsoft money. So i can switch to the latest version if i want to. Only thing i have to input 23 years of data again. Siang. i had done this in the past, each time Microsoft Money "upgraded." Who knows, one day i have the energy to do it again. But i don't think it makes much difference., lah. Go and try to enjoy the joy of "experiment" with the software
NB:
May i suggest, get Microsoft Money only from Microsoft official webside. i always practise this . i never trust any unofficial webside for any free softwares. Better safe then sorry lol!

IMO, IXRR is seem more suitable to calculate return for active cash flow, rather than on passive fund e.g. idle fund.

Anyway, it does not make diff for me, since my strategy is similar as KopiKat, always 100% vested almost all the time.

Will use it for bench-marking from now.

(29-06-2012, 12:41 PM)Temperament Wrote:

(29-06-2012, 11:52 AM)Some-one Wrote:

(29-06-2012, 09:50 AM)Temperament Wrote:

(29-06-2012, 09:38 AM)Some-one Wrote: I am looking to track my portfolio return. Looking at this thread, I was wondering if I invest 50K at the start of 2010 and subsequently add more after getting my income, bonus etc. At the end of 2012, I would have probably invested 100K. If I use XIRR to track the returns, would it be accurate? Should we be tracking the return only on the 50K initial amount instead of the subsequent amount been added?

i suggest you might solve your headache by trying out Microsoft Money. You can download it FOC. i don't know why it is discontinued by Microsoft. If you find it works wonderfully for you, then buy me a "coffee" by telling me you are happy using it. We are actually very lucky, it is a free software only after Microsoft decided to discontinue selling it. Sometimes one K is better than KK. MHO.

Which version are you using? Does the free version supports Windows 7 64 bit? The one that I have seen here does not support Windows 7.
http://microsoft-money-2008.en.softonic.com/

If you are using for the first time try to use the last version. Or experiment with the version that you can use. i am using the UK. 2005/2006 version. Actually i have captured all the transaction data since day one of my "trading" with Microsoft money. So i can switch to the latest version if i want to. Only thing i have to input 23 years of data again. Siang. i had done this in the past, each time Microsoft Money "upgraded." Who knows, one day i have the energy to do it again. But i don't think it makes much difference., lah. Go and try to enjoy the joy of "experiment" with the software
NB:
May i suggest, get Microsoft Money only from Microsoft official webside. i always practise this . i never trust any unofficial webside for any free softwares. Better safe then sorry lol!

I was doing some read-up on this Microsoft Money. The last version is Money Plus Sunset Business and Homes. I just need to know if there are anything in this software that Microsoft Excel cannot do. Why would you recommend it? Does it have some additional features that are better than MS Excel? I just need a simple tool that can calculate as accurately as possible on my portfolio return.

(29-06-2012, 04:46 PM)Some-one Wrote:

(29-06-2012, 12:41 PM)Temperament Wrote:

(29-06-2012, 11:52 AM)Some-one Wrote:

(29-06-2012, 09:50 AM)Temperament Wrote:

(29-06-2012, 09:38 AM)Some-one Wrote: I am looking to track my portfolio return. Looking at this thread, I was wondering if I invest 50K at the start of 2010 and subsequently add more after getting my income, bonus etc. At the end of 2012, I would have probably invested 100K. If I use XIRR to track the returns, would it be accurate? Should we be tracking the return only on the 50K initial amount instead of the subsequent amount been added?

i suggest you might solve your headache by trying out Microsoft Money. You can download it FOC. i don't know why it is discontinued by Microsoft. If you find it works wonderfully for you, then buy me a "coffee" by telling me you are happy using it. We are actually very lucky, it is a free software only after Microsoft decided to discontinue selling it. Sometimes one K is better than KK. MHO.

Which version are you using? Does the free version supports Windows 7 64 bit? The one that I have seen here does not support Windows 7.
http://microsoft-money-2008.en.softonic.com/

If you are using for the first time try to use the last version. Or experiment with the version that you can use. i am using the UK. 2005/2006 version. Actually i have captured all the transaction data since day one of my "trading" with Microsoft money. So i can switch to the latest version if i want to. Only thing i have to input 23 years of data again. Siang. i had done this in the past, each time Microsoft Money "upgraded." Who knows, one day i have the energy to do it again. But i don't think it makes much difference., lah. Go and try to enjoy the joy of "experiment" with the software
NB:
May i suggest, get Microsoft Money only from Microsoft official webside. i always practise this . i never trust any unofficial webside for any free softwares. Better safe then sorry lol!

I was doing some read-up on this Microsoft Money. The last version is Money Plus Sunset Business and Homes. I just need to know if there are anything in this software that Microsoft Excel cannot do. Why would you recommend it? Does it have some additional features that are better than MS Excel? I just need a simple tool that can calculate as accurately as possible on my portfolio return.

Sorry to say, at this point of the communication, it is best to put into practice the saying ,"The proof in the pudding is in the eating". On the other hand of course you choose whatever you like best. Who dare to question you? i have nothing more to say. Period.

(29-06-2012, 07:12 AM)corydorus Wrote: I like to measure how well is my investment in stock rather than how well in managing net worth.

Agree that it is important to have the correct KPI. The following example from post #115 is illustrative:

(27-06-2012, 10:50 PM)shanrui_91 Wrote: If you inject $5000 into your stock portfolio, but you only use $3000 to buy stock. 1 year later, the stock is worth $1500 and I have $2000 in cash.

If your $3k stock become $1.5k after a year, the loss is 50%. Yet by injecting cash to sit idle in the portfolio, the poor performance has diluted to become XIRR=-30%. That will make the investor happier but it does nothing to his pocket. In fact, the poor performance could be diluted even further to -1% by injecting more cash to sit idle in the portfolio. Talk about creative accounting

(29-06-2012, 06:11 PM)wsreader Wrote:

(29-06-2012, 07:12 AM)corydorus Wrote: I like to measure how well is my investment in stock rather than how well in managing net worth.

Agree that it is important to have the correct KPI. The following example from post #115 is illustrative:

(27-06-2012, 10:50 PM)shanrui_91 Wrote: If you inject $5000 into your stock portfolio, but you only use $3000 to buy stock. 1 year later, the stock is worth $1500 and I have $2000 in cash.

If your $3k stock become $1.5k after a year, the loss is 50%. Yet by injecting cash to sit idle in the portfolio, the poor performance has diluted to become XIRR=-30%. That will make the investor happier but it does nothing to his pocket. In fact, the poor performance could be diluted even further to -1% by injecting more cash to sit idle in the portfolio. Talk about creative accounting

At the end of the day, we have to know and understand our own individual purpose of having a Performance Measurement indicator such as XIRR.

If you have a regular job, which pays you a regular income and which pays for all your regular expenses, then, investing your savings gives you, hopefully some extra income. Yes, in such a case, you may do creative accounting to give yourself deep satisfaction that you're outperforming your benchmark (like STI) or others. As you're not reliant on this extra income, it doesn't hurt you anywhere as your regular income will cover for all your expenses anyway.

BUT, if you're planning to retire and rely on your investment returns, then that's a totally different story. No amount of creative accounting is going to help when you finally see the hard figures - investment returns insufficient to cover regular living expenses.... What? Making XIRR = 20% - 30% (through creative accounting) and still not enough? How???

In my case, I try to be as conservative as possible. I don't really mind if my returns shows <10% (or even 6% to 8%) as long as the absolute $$ returns is more than enough to cover my annual expenses and my original capital is being preserved (in the worst case). If I can't achieve that, I better stop investing DIY. Better look for alternatives like ETF or Professionals. In such a case, their XIRR or any other indicator would be useful to gauge if the potential returns will be enough for me to stay retired.

Another use of such a standardised indicator like XIRR would be (as suggested by 'swakoo') to use it on a subset of my portfolio for comparison purposes. For eg., assuming I compare the XIRR for different Yield Stocks and find that I'm doing much, much better with SPH vs STEng / TELCOs, I could assign more funds (assign a bigger %) to SPH. Yes, thanks to 'swakoo', I think I'm going to find a lot of 'fun' use for XIRR...

(30-06-2012, 09:34 AM)KopiKat Wrote: ...

Another use of such a standardised indicator like XIRR would be (as suggested by 'swakoo') to use it on a subset of my portfolio for comparison purposes. For eg., assuming I compare the XIRR for different Yield Stocks and find that I'm doing much, much better with SPH vs STEng / TELCOs, I could assign more funds (assign a bigger %) to SPH. Yes, thanks to 'swakoo', I think I'm going to find a lot of 'fun' use for XIRR...

This is another good usage of XIRR beside measuring the overall investment performance, i.e. bench-marking across different stocks. Minimum effort required if the transactions are already in a list

(30-06-2012, 11:45 AM)CityFarmer Wrote:

(30-06-2012, 09:34 AM)KopiKat Wrote: ...

Another use of such a standardised indicator like XIRR would be (as suggested by 'swakoo') to use it on a subset of my portfolio for comparison purposes. For eg., assuming I compare the XIRR for different Yield Stocks and find that I'm doing much, much better with SPH vs STEng / TELCOs, I could assign more funds (assign a bigger %) to SPH. Yes, thanks to 'swakoo', I think I'm going to find a lot of 'fun' use for XIRR...

This is another good usage of XIRR beside measuring the overall investment performance, i.e. bench-marking across different stocks. Minimum effort required if the transactions are already in a list

but the number of transactions, the timing of transactions matters greatly for such benchmarking.