What is a realistic return on value investing?

[CityFarmer]

Actually, (imho) as we invest in the stock market, if we calculate only the CAGR of our stock portfolio then it's very narrow calculation. It is because you make money in the stock market, you have surplus $$$ in so many other assets too.
Example, my CAGR (using microsoft money for tracking)) for 26 years show only 8-10 %.
But if i CAGR my Total Asset, it definitely > 20%

To me WB is still the champion though he is not the Top CAGR. Because he has done it for 48 years and of course he makes more money then anyone, if your table is correct, even though he is not the top CAGR.

In fact, we should focus only on the ROI of equity, for benchmarking purpose. An individual overall return might be little interest to others, IMO.

We should factor-in the size of AUM into the comparison. Mr. Buffett's Berkshire Hathaway asset was close to $500 billion (or in equity of more than $200 billion) in 2013, while Peter Lynch's Magellan Fund was $13 billion when he retired in 1990

[yawnyawn]

I target 20%-25% returns over long run, it can be done if the strategy is correct. IMO if after using so much time & effort to analyze stocks still end up <15% then might as well close shop buy a S&P500 or STI ETF, why waste time?

I see my post on my targets have set off a bunch of objection and the usual comparison about Warren Buffet, exaggeration on billionaire etc.

Only CityFarmer seems to understand and have a better perspective instead of jumping the gun and making all sorts of sarcastic remarks by making unrealistic assumtption.

To start off let's get real here, how many of us really are having big bucks here? For me I am 28 and only have about 40k. Realistically how many stocks can I buy with that? Maybe 3-4? So I spend so much time to find that 3 stocks in the vast universe so that I can get 10% return? Then what's the point? Might as well buy some index fund rite?

Also I want to take big risk now to make it big. What's wrong with that? Buying a bunch of blue chips for the pathetic 8-10% return not my cup of tea. After 20 years, when I am late 40s rich enough already likely I will moderate returns safer, diversify etc.

Nothing against the people here want to be safe and slowly scrinch their whole lives to build up modest amounts for their retirement @ 65, but I'm not interested in living / working till 65 trying to save $$$ all my life.

If you guys like analyzing stocks for fun and hobby, I guess it's your choice. But TBH it is much better to park money passively and spend your time on other things if your targets are set so low.

Oh please, I’m not interested in empty boasting of richness by anonymous online nicks. So far the only high net worth investor who dare to post his wealth with proper proof is Dividends Warrior.

He is highly respected in the online investment world and I never see him make sarcastic remarks and name calling like some of you here doing. In fact I see many here also attacking him with negative rep points just because he dun agree with you.

If you all want to laugh and make fun of people, at least have the guts to show me your SGX statements, otherwise stop boasting about “old bird” or “rich beyond imagination”, sibei rude and childish.

I agree with the point about building career, I am aiming to save at least 10k every year which together with investment will hopefully let me retire before 50. Like I say, not interested in saving for saving sake or working for working sake until old.

The problem is you guys always assume everyone is like Warren Buffet want to run multi million dollar fund. All the eg. you all give is always some world famous fund manager managing big money. They own so many things in so many stocks of course very hard to make big returns % wise.

If the amount is small you just invest in a few good stocks can make a hundred % if buy correctly. For e.g, my Hankore make >80% by the time I sell in 9 months, but if I own 20 stocks how to get all 20 >80%. Simple maths rite?

I guess when Franko said forumers are "making sarcastic remarks" and "to laugh and make fun of people", he/she must be referring to me as one of the forumers.

Well I want to clarify that I was just being skeptical in a humorous way since that was your first post on VB and you came in with a bang by saying you targeted 20-25% p.a. in the LONG run. I am also sure that we do not do name calling here, verbal warnings or even pbans are given by the mods or admins if forumers start to abuse one another. I think forumers here in general are more level headed than elsewhere.

Being investors, we are often skeptical and wary when evaluating businesses, management's capabilities, financial statements etc. Often a MOS will be applied to the intrinsic value we think of a business. So pardon me when I was being skeptical of you.

You mentioned one stock Hankore that i am involved in now. So I see you have divested and if you will like to share, what is your reason for divestment? There is actually a thread on Hankore in this forum and I look forward reading your thoughts there.

Lastly, Welcome to ValueBuddies

[Temperament]

Might as well invest in one "GOOD STOCK" only.
Sure make more then 25% one in ? months???
Then repeat from 28 to 50 years old.
Can retired by 40 years old, i think?

[yawnyawn]

If no one posts their net worth, how do you guys actually know this info?

If you hang long enough, you probably will get clues here and there. And, some forum members may exchange information privately for investment purposes.

Many members here are trading/investing in corporate bonds => they are accredited investors.
Many members here are investing in hedge funds => they are accredited investors.


An individual is an accredited investor

(A) Whose net personal assets exceed in value $2 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount; or

(B) Whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;


At least, I know two members that had posted here are hedge fund managers managing their own funds.
And, we have oil traders, accountants, doctor, businessmen.
And if you are resourceful enough, you probably can trace some members to the top 20 list of shareholders in listed companies.

But, the most telling of all, is the maturity and the content of the articles that are posted in this forum.

There are 2? I only know d.o.g is. Is it ok to share who is the other member?

That is right, there are many HNWI in this forum. It is interesting to read and learn about their traits and emulate them. For instance iirc, one member buys rice by the sack(50kg) and buys used cars and eat economical rice etc.

To understand more, I suggest to read "how to tell if you're rich" thread under the Personal Finance section.

[mobo]

Wow... I was marveling at the sudden fury of posts in my thread within a short span.

Hi Franko,

Back to your statement on targeting 20-25% annual returns for your investment, do you know of anyone either through research or personally who has achieved that on a long term basis?

The reason why I am asking this rhetorical question is you will realize the answer to that is probably close to, if not, zero. I don’t want to frame this entire discussion into a put down session along the lines of how unattainable your goals are, but would rather like to encourage you to instead think along this track:

What competencies do you possess that makes you confident enough to outperform virtually the entire investment community out there?

In theory there is nothing wrong with setting high standards, but what is more important is to be able to take a step back, do a self-evaluation and objectively assess what it is that gives you the competitive edge to achieve frontier results.

On a personal level, I started out with somewhat similar but less ambitious goals (I am the thread starter in case you haven’t noticed). My expertise has always been on the property front and I only seriously dabbled in equities recently, but there are certain underlying principles which are similar be it property or equities. Besides learning a lot from the knowledgeable contributors here, I had the good fortune of getting to know someone personally who is really good in equity investments - I am talking about someone who delivered long term ~15% p.a. and beat indices by large margins (7-8 ppt consistently).

It is a piece of luck for me not only because of what I learnt in terms of investment thinking from him, but more importantly, to recognize the kind of gap between a relatively financial savvy manager in a MNC like me and a top money manager. I began to sense that it takes certain zen-like and unquantifiable innate qualities besides the usual reading financial reports, following news, looking at charts, talking to management or churning out financial ratios and Excel models to achieve outstanding portfolio performance. Anyone can do e-learning, play with spreadsheets and even take up a CFA or MSc Finance, but demonstrate 15%p.a. over the long term? Very rare. 25%p.a.? You do the Math. Even the hedge fund stars who made a good call during GFC have failed to replicate their success in recent years.

For your case I suspect it’s an issue of not knowing what you do not know. No offence to Dividend Warrior, but based on what was disclosed, he is neither a high net worth individual nor exemplary of a well respected investment guru like you claimed. The fact that you think he is, though, is telling of the extent of your knowledge deficiency.

Until you are able to convincingly answer the question I posed to you above, I strongly encourage you to focus more on upskilling and picking up as much as you can at this age rather than setting arbitrary performance targets on something which you do not have control over. Such thinking encourages excessive risk taking which in turn leads to emotional instability and knowledge stagnation, none of which helps you in striking rich and retiring before 50.

[Temperament]

Actually, (imho) as we invest in the stock market, if we calculate only the CAGR of our stock portfolio then it's very narrow calculation. It is because you make money in the stock market, you have surplus $$$ in so many other assets too.
Example, my CAGR (using microsoft money for tracking)) for 26 years show only 8-10 %.
But if i CAGR my Total Asset, it definitely > 20%

To me WB is still the champion though he is not the Top CAGR. Because he has done it for 48 years and of course he makes more money then anyone, if your table is correct, even though he is not the top CAGR.

In fact, we should focus only on the ROI of equity, for benchmarking purpose. An individual overall return might be little interest to others, IMO.

We should factor-in the size of AUM into the comparison. Mr. Buffett's Berkshire Hathaway asset was close to $500 billion (or in equity of more than $200 billion) in 2013, while Peter Lynch's Magellan Fund was $13 billion when he retired in 1990

Strictly speaking yes. After all this is a forum about stock investment. Even then, we got no way to compare A to B like comparing an apple to an apple or an orange to an orange. Investing in the stock market has too many variables and unknowns; some of which you can't even think of until it happens.
You need only to answer to yourself whether you are happy with your CAGR in stock investment.
i am O. K.

[corydorus]

Actually, (imho) as we invest in the stock market, if we calculate only the CAGR of our stock portfolio then it's very narrow calculation. It is because you make money in the stock market, you have surplus $$$ in so many other assets too.
Example, my CAGR (using microsoft money for tracking)) for 26 years show only 8-10 %.
But if i CAGR my Total Asset, it definitely > 20%

To me WB is still the champion though he is not the Top CAGR. Because he has done it for 48 years and of course he makes more money then anyone, if your table is correct, even though he is not the top CAGR.

In fact, we should focus only on the ROI of equity, for benchmarking purpose. An individual overall return might be little interest to others, IMO.

We should factor-in the size of AUM into the comparison. Mr. Buffett's Berkshire Hathaway asset was close to $500 billion (or in equity of more than $200 billion) in 2013, while Peter Lynch's Magellan Fund was $13 billion when he retired in 1990

Strictly speaking yes. After all this is a forum about stock investment. Even then, we got no way to compare A to B like comparing an apple to an apple or an orange to an orange. Investing in the stock market has too many variables and unknowns; some of which you can't even think of until it happens.
You need only to answer to yourself whether you are happy with your CAGR in stock investment.
i am O. K.

Mid to Long term performance, XIRR or CGAR will tell the story. I personally do not like to add gold, cash or FD, property or even CPF into measure so that we can have a better apple to apple compare in share performances. Bond and Preference Shares are probably ok. Take note we compare to try to understand or evaluate our current strategy. While higher net worth will give the scale, is the punch that we need to learn.

[Temperament]

Actually, (imho) as we invest in the stock market, if we calculate only the CAGR of our stock portfolio then it's very narrow calculation. It is because you make money in the stock market, you have surplus $$$ in so many other assets too.
Example, my CAGR (using microsoft money for tracking)) for 26 years show only 8-10 %.
But if i CAGR my Total Asset, it definitely > 20%

To me WB is still the champion though he is not the Top CAGR. Because he has done it for 48 years and of course he makes more money then anyone, if your table is correct, even though he is not the top CAGR.

In fact, we should focus only on the ROI of equity, for benchmarking purpose. An individual overall return might be little interest to others, IMO.

We should factor-in the size of AUM into the comparison. Mr. Buffett's Berkshire Hathaway asset was close to $500 billion (or in equity of more than $200 billion) in 2013, while Peter Lynch's Magellan Fund was $13 billion when he retired in 1990

Strictly speaking yes. After all this is a forum about stock investment. Even then, we got no way to compare A to B like comparing an apple to an apple or an orange to an orange. Investing in the stock market has too many variables and unknowns; some of which you can't even think of until it happens.
You need only to answer to yourself whether you are happy with your CAGR in stock investment.
i am O. K.

Mid to Long term performance, XIRR or CGAR will tell the story. I personally do not like to add gold, cash or FD, property or even CPF into measure so that we can have a btter apple to apple compare in share performances. Bond and Preference Shares are probably ok.

i agree.
We should not commingle our different investments or funds.
But we still have to track our Total Asset & Liability.

[smallcaps]

I see my post on my targets have set off a bunch of objection and the usual comparison about Warren Buffet, exaggeration on billionaire etc.

Only CityFarmer seems to understand and have a better perspective instead of jumping the gun and making all sorts of sarcastic remarks by making unrealistic assumtption.

To start off let's get real here, how many of us really are having big bucks here? For me I am 28 and only have about 40k. Realistically how many stocks can I buy with that? Maybe 3-4? So I spend so much time to find that 3 stocks in the vast universe so that I can get 10% return? Then what's the point? Might as well buy some index fund rite?

Also I want to take big risk now to make it big. What's wrong with that? Buying a bunch of blue chips for the pathetic 8-10% return not my cup of tea. After 20 years, when I am late 40s rich enough already likely I will moderate returns safer, diversify etc.

Nothing against the people here want to be safe and slowly scrinch their whole lives to build up modest amounts for their retirement @ 65, but I'm not interested in living / working till 65 trying to save $$$ all my life.

If you guys like analyzing stocks for fun and hobby, I guess it's your choice. But TBH it is much better to park money passively and spend your time on other things if your targets are set so low.

Not sure wat u mean by 'big risk' but another way might be to take lower risk approach with small to medium sized profitable companies with solid balance sheets and believable businesses , at the stage whereby they r capable of growth.

For example, a 100mil book value company capable of 15% ROE.
Assuming bought at 0.8x of book value. 3% of book value is given out as dividend every year. The rest of the 12% is reinvested and gives 15% ROE also. Then after four years, sold at 1.2x of book value:

------Year------1--------2--------3---------4
book value......100......112......125........141
dividend..........3..........3.4.....3.8..........4.2
price..............80................................169
total dividend over 4 years = 14.3
CAGR over 4 years (capital gain + total dividend) = 23%

[specuvestor]

Read uncle CW888 blog.

http://createwealth8888.blogspot.sg/2014...-time.html



Be realistic on longterm CAGR goal.

Nice chart. Indeed we try to aim for the sky but still have to be realistic. Mozart wrote first symphony at 4 and opera at 11, quite pointless trying to match that Like I said, Buffett and Jobs are outliers.

The problem is you guys always assume everyone is like Warren Buffet want to run multi million dollar fund. All the eg. you all give is always some world famous fund manager managing big money. They own so many things in so many stocks of course very hard to make big returns % wise.

If the amount is small you just invest in a few good stocks can make a hundred % if buy correctly. For e.g, my Hankore make >80% by the time I sell in 9 months, but if I own 20 stocks how to get all 20 >80%. Simple maths rite?

That's called Asset Allocation skills. It's more than just individual stock returns. It primarily involves balancing your net worth exposure between cash, real estate, growth stocks, cash flow assets, businesses/ employment, etc. What is surprising is your advocacy of putting everything in "growth" stocks. There are people that more than doubled their money in Blumont too.

You know you are in a "cocktail talk" when people boast of their skills in stocks but never mention impact on their net worth. Just like people talk about Oei's $2m profit on AIG but forgot to mention $2b loss on FX

Besides Asset Allocation, there is also the issue of timing which might be sacriligious to some Index fund returns on long run is actually quite dependent on which time frame you use. But indeed it is probably true that we need to outperform the market if we put in significant effort. That's actually what Buffett was trying to say in his last AR letter, which some jump the gun and thought he is advocating index funds