What is a realistic return on value investing?

[changwk]

hi,

on the topic of NAV, it has been discussed in other posts before. i have found them very useful to calc my own NAV. it's quite fun to see the rise and fall of your own NAV at the end of each month.

Once you have setup the excel template and assuming it's correct, all you need to do is to enter the needed values to compute the NAV. The template calculation will take care of itself.

With NAV, you can also compare your performance against STI index. Your performance will be relative to STI index. if STI index rose by 10% that year and your NAV rose by 12% that year, then your own relative performance is only 2% better than STI index (12% minus 10%).

if you do this month by month and year after year, you will have your performance over a period of time.

I'm including a useful post on NAV.
http://www.valuebuddies.com/thread-1268-...culate+nav

[mobo]

Hi guys,

I found an interesting article from an blog by a respectable financial investment guru which contradict from what most of you are saying.

Any thoughts?

******************************************************
http://moneymatters.sg/5-tips-to-help-yo...cessfully/

"From past market cycles, I observed that during each bull market, which typically lasts from two to four years, the Dow Jones Index in the US, or even the Straits Times Index (STI) in Singapore, increased by over 100%. For instance, in the last bull market from 2003 to 2007, the Straits Times Index (STI) rose from 1,200 points to 3,900 points, representing a return of 225% in 4 years, or easily over 50% per year. Thus, if you learn how to buy low and sell high, obtaining an average of over 10% annual returns is very achievable."

[KopiKat]

Hi guys,

I found an interesting article from an blog by a respectable financial investment guru which contradict from what most of you are saying.

Any thoughts?

******************************************************
http://moneymatters.sg/5-tips-to-help-yo...cessfully/

"From past market cycles, I observed that during each bull market, which typically lasts from two to four years, the Dow Jones Index in the US, or even the Straits Times Index (STI) in Singapore, increased by over 100%. For instance, in the last bull market from 2003 to 2007, the Straits Times Index (STI) rose from 1,200 points to 3,900 points, representing a return of 225% in 4 years, or easily over 50% per year. Thus, if you learn how to buy low and sell high, obtaining an average of over 10% annual returns is very achievable."

It is saying exactly what we'd been saying, see the text in bold.

So, how did the 50% / yr drop to 10% average?

1) It's highly improbable that you'll be able to catch the exact low and the high. At best, maybe somewhere in between and that'd reduce your annualised gains substantially.

2) What happen in between cycles? If you just hang on to your money waiting for the next low cycle, it'd be at best earning the pathetic interest rate in FD or SGS Bonds or ??. This will further affect your annualised returns - the bigger the time gap between cycles, the worse it becomes.

So, IMO, 10% annualised returns is really achievable ONLY by the better (or luckier) investors.

[Jared Seah]

1) KopiKat,

You are still the most perceptive and best poker out there! LOL!


2) mobo,

Yeah, do ask that "salesperson" why EASILY 50% per year has become an achievable 10% per year?

Is he back tracking or have you misquoted him?

P.S. I am ex-salesman; we know our own kind.

[dzwm87]

http://moneymatters.sg/5-tips-to-help-yo...cessfully/

"From past market cycles, I observed that during each bull market, which typically lasts from two to four years, the Dow Jones Index in the US, or even the Straits Times Index (STI) in Singapore, increased by over 100%. For instance, in the last bull market from 2003 to 2007, the Straits Times Index (STI) rose from 1,200 points to 3,900 points, representing a return of 225% in 4 years, or easily over 50% per year. Thus, if you learn how to buy low and sell high, obtaining an average of over 10% annual returns is very achievable."

"if you learn how to buy low and sell high" - i have been actively investing for only 1.5 years. Though the time horizon is short but I can surely say that learning how to buy low and sell high is a general concept by itself. By no means are we capable of buying at the lowest and selling at the highest.

[mobo]

Hi guys,

I found an interesting article from an blog by a respectable financial investment guru which contradict from what most of you are saying.

Any thoughts?

******************************************************
http://moneymatters.sg/5-tips-to-help-yo...cessfully/

"From past market cycles, I observed that during each bull market, which typically lasts from two to four years, the Dow Jones Index in the US, or even the Straits Times Index (STI) in Singapore, increased by over 100%. For instance, in the last bull market from 2003 to 2007, the Straits Times Index (STI) rose from 1,200 points to 3,900 points, representing a return of 225% in 4 years, or easily over 50% per year. Thus, if you learn how to buy low and sell high, obtaining an average of over 10% annual returns is very achievable."

It is saying exactly what we'd been saying, see the text in bold.

So, how did the 50% / yr drop to 10% average?

1) It's highly improbable that you'll be able to catch the exact low and the high. At best, maybe somewhere in between and that'd reduce your annualised gains substantially.

2) What happen in between cycles? If you just hang on to your money waiting for the next low cycle, it'd be at best earning the pathetic interest rate in FD or SGS Bonds or ??. This will further affect your annualised returns - the bigger the time gap between cycles, the worse it becomes.

So, IMO, 10% annualised returns is really achievable ONLY by the better (or luckier) investors.

Hi KopiKat,

I understand that you are one of the more optimistic posters out here who said that if one willing to take up more risks is possible to achieve >10%.

I am more asking many other posters earlier who are giving ranges between 6% - 10% for informed investors. This guru seems to say that otherwise as he claims that 10% is easily achievable & seem to imply this is quite common among investors.

Normally I won't bother with the usual BS garbage from online people who only know how to shout HUAT, but I read his other blog posting and they seem to be quite sensible that's why I think he sounds quite knowledgable and dun sound like the exaggeration kind.

[Temperament]

When one invest, it's good to have a gaol of aiming for a certain % of return in mind. On the other hand if you just always aim for the better to best of the stocks currently available in the SGX market or other markets, it's more than enough. (i failed to do it yet my % of return definitely beat inflation) The rest of the matter you can hardly control or predict. i don't worry too much of it

[Musicwhiz]

So, how did the 50% / yr drop to 10% average?

Because the stated return for a specific period can be 50% or even 100% for an index, but you need to compute the annualized return and it probably works out to about 10% to 12% per annum over a long period of time. Basically the headline number is just to impress - unless you are telling me you own companies which can grow at 100% per annum for 3-5 years, otherwise I'd say most of it is sales talk and hot air. The stated return of 10%/annum for investment in equities is a more realistic one, albeit still very high. Most people should be happy with a 7% to 8% return, consisting of 2-3% capital gains and 4-5% dividend yield.

Note that this already beats the majority of people out there who either i) don't invest, ii) trade frequently and erode their returns or iii) are not prudent and expect 20% per annum, but instead end up with 2% per annum (hence, a complete waste of their time and effort).

With prudence, one should target a realistic, consistent and decent return.

Let the sales people do their talking (he's not the only one), I think most in this forum understand what a realistic return is.

[Temperament]

So, how did the 50% / yr drop to 10% average?

Because the stated return for a specific period can be 50% or even 100% for an index, but you need to compute the annualized return and it probably works out to about 10% to 12% per annum over a long period of time. Basically the headline number is just to impress - unless you are telling me you own companies which can grow at 100% per annum for 3-5 years, otherwise I'd say most of it is sales talk and hot air. The stated return of 10%/annum for investment in equities is a more realistic one, albeit still very high. Most people should be happy with a 7% to 8% return, consisting of 2-3% capital gains and 4-5% dividend yield.

Note that this already beats the majority of people out there who either i) don't invest, ii) trade frequently and erode their returns or iii) are not prudent and expect 20% per annum, but instead end up with 2% per annum (hence, a complete waste of their time and effort).

With prudence, one should target a realistic, consistent and decent return.

Let the sales people do their talking (he's not the only one), I think most in this forum understand what a realistic return is.

i do by what i have today. Amen.
NB: 10% P/A annualised return for 20 years for $100 is $672.749. For $100,000 is $672,749.99. Of course in reality or real life it won't be a "straight line" return.

[swakoo]

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.