What is a realistic return on value investing?

[CityFarmer]

I do share the idea, and a comparison among value investors, will provide a good feedback on an individual relative performance, on top of index bench-marking.

We have many portfolio disclosures in the "Other" sub-forum, for the purpose. You might want to refer to each individual performance, and follow-up the discussion there. How about a thread on CFG Portfolio there?

One more way, is also to bench-mark with value fund manager's performance e.g. Yeoman Cap and lighthouse advisors etc. You should be able to google their websites.

My portfolio performance is here
http://www.valuebuddies.com/thread-5722.html

Just saw this thread.
I have been looking for some VBs to share their honest returns over a longer period of time, just to have a gauge on how I have been doing personally. Would appreciate if some fellow VBs give their HONEST returns to do a comparison.
No egos hopefully and anyway this is all anonymous.
I'll share mine:
I track returns using XIRR function, computing the NAV every quarterly. I only started tracking in May 2011 as before that, my approach wasn't strictly value oriented. Here's my annual returns:

2011 (started tracking from 3rd May 2011): 11.07%
2012: 17.96%
2013: 9.47%
2014: 12.23%
CAGR from 3rd May 2011 - 31 Dec 2014: 12.41%

I do employ leverage. (just started using leverage in 2013) Previously I benchmarked against STI ETF, but have decided to stop doing so starting 2015. Afterall, whats the point of active management if I cant beat STI ETF. So I am trying to benchmark against some of the value oriented fund managers. I am not a professional fund manager, although I spend a considerable amount of time studying and researching. My AUM is in the low 7 digits range.
Do share your returns as well as some of your philosophy so that we can all have an idea of where we stand and of course, ultimately, how we can do better.

[CityFarmer]

The best reference of S&P500 return, is in Mr. Buffett's shareholder letter. From 1965-2013, the return cum dividend was 9.8%. This consistent with other references which state 9-10% (w/ dividend) e.g. SPDR S&P500 ETF report since 1993

http://www.berkshirehathaway.com/letters/2013ltr.pdf

http://www.spdrs.com.sg/etf/fund/fund_detail_SPY.html

In fact, similar return was observed for STI, which is 8-9%, base on SPDR STI ETF, since 2002, from the same link above

IMO, the expected return of active managed fund, should be around 12% min in SGX, with a 3% risk premium, otherwise a passive fund may be a better choice.

Why don't we just look at the chart and tell me you are comfortable whether it will meet future returns.

S&P 500 Chart

Roller Coaster Rider for the past 20 years rather than consistent increment prior to 1982.

I am not so sure on the Chart. Let me approach it differently.

Refer to data provided by Mr. Buffett.

Average gain (1965-2013) was 11.1% and SD was 17.9%. Let's see the last 20 years (1993-2013), the average was 11.1% and SD was 19.2%.

It is more volatile in the last 20 years, comparing with the last 49 years, with the average remains the same.

Should I tell myself that the S&P500 future return will be very much different from last half a century? Well, I will say it should be not much a diff, albeit the past will never tell the future for sure.

Volatility maybe biased because we use 2013 as the reference point to count backward to 1965 and 1993. As past 20 year are very volatile we basically have both periods included them that forms a big segment on both their measures.

I am sure it will be different picture if we measure 4 segmental periods on volatility without overlap but not sure how to do it.

1974-1984
1984-1994
1994-2004
2004-2014

Cory

The measurement is base on annual gain, with (y+1)/y on each year. I am not sure on the biased of 2013 as reference??

The last 20 year performance of S&P500 ETF was around 9.33%, as provided by the previous link, comparing with long term return of 9.8% as reported by Mr. Buffett. It is consistent with my conclusion.

[corydorus]

The best reference of S&P500 return, is in Mr. Buffett's shareholder letter. From 1965-2013, the return cum dividend was 9.8%. This consistent with other references which state 9-10% (w/ dividend) e.g. SPDR S&P500 ETF report since 1993

http://www.berkshirehathaway.com/letters/2013ltr.pdf

http://www.spdrs.com.sg/etf/fund/fund_detail_SPY.html

In fact, similar return was observed for STI, which is 8-9%, base on SPDR STI ETF, since 2002, from the same link above

IMO, the expected return of active managed fund, should be around 12% min in SGX, with a 3% risk premium, otherwise a passive fund may be a better choice.

Why don't we just look at the chart and tell me you are comfortable whether it will meet future returns.

S&P 500 Chart

Roller Coaster Rider for the past 20 years rather than consistent increment prior to 1982.

I am not so sure on the Chart. Let me approach it differently.

Refer to data provided by Mr. Buffett.

Average gain (1965-2013) was 11.1% and SD was 17.9%. Let's see the last 20 years (1993-2013), the average was 11.1% and SD was 19.2%.

It is more volatile in the last 20 years, comparing with the last 49 years, with the average remains the same.

Should I tell myself that the S&P500 future return will be very much different from last half a century? Well, I will say it should be not much a diff, albeit the past will never tell the future for sure.

Volatility maybe biased because we use 2013 as the reference point to count backward to 1965 and 1993. As past 20 year are very volatile we basically have both periods included them that forms a big segment on both their measures.

I am sure it will be different picture if we measure 4 segmental periods on volatility without overlap but not sure how to do it.

1974-1984
1984-1994
1994-2004
2004-2014

Cory

The measurement is base on annual gain, with (y+1)/y on each year. I am not sure on the biased of 2013 as reference??

The last 20 year performance of S&P500 ETF was around 9.33%, as provided by the previous link, comparing with long term return of 9.8% as reported by Mr. Buffett. It is consistent with my conclusion.

Thought i just said. I am not saying the figure is wrong but the measure itself can be misleading.

(1965-2013) is 38 years which includes overlap of 1993-2013 results
(1993-2013) is 20 years

Annualizing them tend to extrapolate future returns which if we have looks at the S&P chart is not only not linear is highly volatile for the past recent years. While is true for investors invested back then and hold till today there were 2 huge price leaps as i explained earlier. For new investors coming in today, i am not so sure you will see this level of returns anymore. The S&P will probably be at almost vertical growth in the chart for this to happen to allow anytime to enter. You probably need to time your entry and exit.

[CityFarmer]

Thought i just said. I am not saying the figure is wrong but the measure itself can be misleading.

(1965-2013) is 38 years which includes overlap of 1993-2013 results
(1993-2013) is 20 years

Annualizing them tend to extrapolate future returns which if we have looks at the S&P chart is not only not linear is highly volatile for the past recent years. While is true for investors invested back then and hold till today there were 2 huge price leaps as i explained earlier. For new investors coming in today, i am not so sure you will see this level of returns anymore. The S&P will probably be at almost vertical growth in the chart for this to happen to allow anytime to enter. You probably need to time your entry and exit.

I have also said the result isn't biased.

Let's have the last attempt, by separating into two periods, 1965-1993 (without "huge price leap") and 1993-2013 (include the "two price leap"), on same set of data

(1993-2013): Average gain was 11.1% and SD was 17.9%
(1965-1993): Average gain was 11.1% and SD was 16.8%

The conclusion still the same. The "huge price leap", has no impact on average and a slight increased in SD, thus the LT return should around the same for both period.

We might have different brain frequency

[corydorus]

Not going to quote the whole thread again. My point is you are choosing the year of low to make your point.

If i choose early 2000 (peak) as entry to 2015 (peak) , that's 15 years apart where you have only 2% returns annualized

And to achieve 18% returns annualized between 2000 - 2015, S&P needs to be at 18000 point at Year 2015.
S&P500 current is at 2051 only.

[csl123]

Some takeaways:

1) It is difficult to determine the return of S&P 500. It depends on when is the reference point.

2) Active investing (in this case is value investing) should outperform passive investing (i.e buying etf). Meaning if you take 01 Jan 2010 as starting point, measuring the performance of value investing should also start from 01 Jan 2010.

3) Hence maybe it is not beneficial to state a realistic return of value investing, but rather the differential over passive investment, given the same amount of risk.

[CityFarmer]

Not going to quote the whole thread again. My point is you are choosing the year of low to make your point.

If i choose early 2000 (peak) as entry to 2015 (peak) , that's 15 years apart where you have only 2% returns annualized

And to achieve 18% returns annualized between 2000 - 2015, S&P needs to be at 18000 point at Year 2015.
S&P500 current is at 2051 only.

I quoted the year, 1993, because you highlight "last 20 years", since the data ended with 2013, 1993 happen to be the starting of "last 20 years"

It has proven that we do indeed have different brain frequency

[CityFarmer]

Some takeaways:

1) It is difficult to determine the return of S&P 500. It depends on when is the reference point.

A "ball-park" figure for future long term return of ETF is necessary for planning. The most reliable "ball-park" figure, is from the long term average, I guess. As usual, the future will never be the same, but the rhythm usually stays.

2) Active investing (in this case is value investing) should outperform passive investing (i.e buying etf). Meaning if you take 01 Jan 2010 as starting point, measuring the performance of value investing should also start from 01 Jan 2010.

3) Hence maybe it is not beneficial to state a realistic return of value investing, but rather the differential over passive investment, given the same amount of risk.

Yes, the delta is important to know where you are on year-to-year basis. A "ball-park" return figure, will provide a realistic and reasonable expectation on future long term return. Both have its purpose, I guess.

[corydorus]

Not going to quote the whole thread again. My point is you are choosing the year of low to make your point.

If i choose early 2000 (peak) as entry to 2015 (peak) , that's 15 years apart where you have only 2% returns annualized

And to achieve 18% returns annualized between 2000 - 2015, S&P needs to be at 18000 point at Year 2015.
S&P500 current is at 2051 only.

I quoted the year, 1993, because you highlight "last 20 years", since the data ended with 2013, 1993 happen to be the starting of "last 20 years"

It has proven that we do indeed have different brain frequency

I think we have classic out of context ....

[cif5000]

Why are you guys talking about the market return of S&P? Does "realistic return" simply mean the market return?

As far as I know, practitioners of value investing produce annual results ranging from negative (or should I say losses) to triple-digit gains, even on the same year. It really depends on the person rather than the method.

You put in more effort and you'll tend to get better results. You have more experience and you'll suffer smaller losses. That's the real world. Hardly the method you used.