Using NAV to calculate portfolio performance

[yyt]

Hi all,

after reading some of d.o.g's previous post provided by fellow forummers, it drove me to do some NAV calculation to evaluate my own portfolio's performance.
How to calc a NAV for a "stock only" portfolio is pretty straight foward.
Information on that can be found here, in the document labeled "d.o.g. 2009 final.doc", I beleive it's pg 6.

I would like to however, clarify the calc of NAV for a "fund" type of portfolio, i.e. one that holds onto cash too.

example.
Principle : $10,000 ($1/unit)
NAV : $1
Units : 10,000

Portfolio End of Mth 1 (realized loss)
Buy ABC : $5,000 (No appreciation)

Transaction Cost : $27
Cash Left : $5,000 - $27 = $4,923 (49.73% not invested)
NAV : (5,000+4,923)/10,000 = $0.9923

Portfolio End of Mth 2 (realized gains)
Stock ABC : $5,000 (No appreciation)

Dividends : $250
Cash Left : $4,923 + $250 = $5,173 (51.73% not invested)
NAV : ($5,000+$5,173)/10,000 = $1.0173

Portfolio End of Mth 3 (unrealized gains)
Stock ABC : $5,100
Unrealized Gain : $100 from ABC

Cash Left : $5,173 unchanged (51.73% not invested)
NAV : ($5,100+$5,173)/10,000 = $1.0273

Portfolio End of Mth 4 (addition of units)
Stock ABC : $5,100
Unrealized Gain : $100 from ABC

Capital Injection of $1,000 == # of units increase by 1,000 (this is wrong)
Capital Injection of $1,000 == $1000/1.0273 = 973units (as corrected)
Cash Left = $5,173+$1,000 = $6,173 (56.12% not invested)
NAV : ($5,100+$6,173)/10,973 = $1.0273(Note to self : The NAV doesn't change due to capital injection!)


Is my NAV calc too simplified or fundamentally wrong?
I'm using just [(Market Value of Stocks)+Realized Gains(Loss)]/# of units.
Would like to hear from all Thanks in advance

[freedom]

Portfolio End of Mth 4 (addition of units)
Stock ABC : $5,100
Unrealized Gain : $100 from ABC

Capital Injection of $1,000 == # of units increase by 1,000
Cash Left = $5,173+$1,000 = $6,173 (56.12% not invested)
NAV : ($5,100+$6,173)/11,000 = $1.0248

newly injected capital of $1000, should not increase # of units by 1,000, because the fund NAV/unit already increases to $1.0273. with capital injection, the NAV/unit should not increase/decrease as there is no profit/loss.

[thinknotleft]

Your step four is wrong.

$1000 = 1000/1.0273 units.

It's like buying into unit trusts. You buy lesser units, when each unit is more expensive.

Personally, I use this unit-based method to compute the returns for my portfolio, because the computed returns accounts for inflows and outflows of funds.

Pity that there are very few (probably none) other Singapore blogs that use this unit-based method. The returns shown in most blogs are probably imprecise when there are inflows/outflows of funds into their portfolio.

[yyt]

If we don't cater for an increase in units, how can we be accountable for the additional $1000?
I'm seeing it as a dilution of shared profits. No?

Portfolio End of Mth 4 (addition of units)
Stock ABC : $5,100
Unrealized Gain : $100 from ABC

Capital Injection of $1,000 == # of units increase by 1,000
Cash Left = $5,173+$1,000 = $6,173 (56.12% not invested)
NAV : ($5,100+$6,173)/11,000 = $1.0248

newly injected capital of $1000, should not increase # of units by 1,000, because the fund NAV/unit already increases to $1.0273. with capital injection, the NAV/unit should not increase/decrease as there is no profit/loss.

[freedom]

But if we don't cater for an increase in units, how can we be accountable for the additional $1000?
I'm seeing it as a dilution of shared profits. No?

Portfolio End of Mth 4 (addition of units)
Stock ABC : $5,100
Unrealized Gain : $100 from ABC

Capital Injection of $1,000 == # of units increase by 1,000
Cash Left = $5,173+$1,000 = $6,173 (56.12% not invested)
NAV : ($5,100+$6,173)/11,000 = $1.0248

newly injected capital of $1000, should not increase # of units by 1,000, because the fund NAV/unit already increases to $1.0273. with capital injection, the NAV/unit should not increase/decrease as there is no profit/loss.

# of units will increase but not 1000. 1000/1.0273.

[yyt]

Oh.....ok i think i get the idea. Thanks.
Cos now 1 unit is not $1.
Guess freedom was trying to point that out too. Thanks dude

Your step four is wrong.

$1000 = 1000/1.0273 units.

It's like buying into unit trusts. You buy lesser units, when each unit is more expensive.

Personally, I use this unit-based method to compute the returns for my portfolio, because the computed returns accounts for inflows and outflows of funds.

Pity that there are very few (probably none) other Singapore blogs that use this unit-based method. The returns shown in most blogs are probably imprecise when there are inflows/outflows of funds into their portfolio.

[Jared Seah]

We now have 2 main school of measuring portfolio returns by Singapore's forum writers and bloggers:

1) The unit trust way of using NAV, and

2) the XIRR excel sheet way of measuring CARG

Just for the sake of offering alternatives, I prefer to use "imprecise" money measurement method instead. If I start with 10,000 on 1st Jan, come end 31 Dec, my portfolio value (realised and unrealised gains/loss including cash on hand) will determine how much I've lost or made for the year. If I withdraw or add new money during the year to my portfolio, I don't really care about the "precise" annual returns since I am not a professional fund manager who needs to outperform his peers to earn more business.

I've started to experiment with XIRR since beginning of the year. But one thing I've never figured out yet is how we can have positive returns in money year-to-date but get a negative XIRR% return? LOL! I blame my weakness in math!

I tend to take a glance at my portfolio quarterly, and only do a former calculation annually. Like the Kenny Roger's song: I don't count my money when I am at the table. There's time enough to count the money, when the dealing is done

I race against myself so as not to be too hard on myself:

http://singaporemanofleisure.blogspot.co...money.html

[yeokiwi]

We now have 2 main school of measuring portfolio returns by Singapore's forum writers and bloggers:

1) The unit trust way of using NAV, and

2) the XIRR excel sheet way of measuring CARG

Just for the sake of offering alternatives, I prefer to use "imprecise" money measurement method instead. If I start with 10,000 on 1st Jan, come end 31 Dec, my portfolio value (realised and unrealised gains/loss including cash on hand) will determine how much I've lost or made for the year. If I withdraw or add new money during the year to my portfolio, I don't really care about the "precise" annual returns since I am not a professional fund manager who needs to outperform his peers to earn more business.

I use the same method as you. Who cares what is the percentage return as long year on year I see positive return(salary+investment gains) to my total net asset

[yyt]

Yeah, bottom line is to make enuff $$ to retire comfortably, many roads lead to rome yah?

Due to limited capital, me and a few of my friends decide to pool some cash together and start the ball rolling.
I think NAV is this case is an acceptable benchmark for performance, just to set everything as clear and transparent as posisble. In the meantime have a common benchmark for expectations.

[cif5000]

I use the same method as you. Who cares what is the percentage return as long year on year I see positive return(salary+investment gains) to my total net asset

Agree that absolute increase is important.

I started tracking only to see if I can pick stocks better than I can throw darts. For some, investment gains may be due more to luck rather than "skills". I think in this game, luck runs out pretty quickly, so it's better to know oneself before getting too indulged in it.