What is a realistic return on value investing?

[CityFarmer]

Well, it might be a misalignment between views in the discussion, IMO

If the discussion is on the realistic return of value investing, assuming most things are right, including luck, from a retail PE investor, than probably 20-25% p.a. return may not be too unrealistic as an ultimate target. I reckon this is what Franko's comment is all about

If the discussion is on the realistic return of value investing by Franko, than I do agree with most views posted.

[Temperament]

Well, it might be a misalignment between views in the discussion, IMO

If the discussion is on the realistic return of value investing, assuming most things are right, including luck, from a retail PE investor, than probably 20-25% p.a. return may not be too unrealistic as an ultimate target. I reckon this is what Franko's comment is all about

If the discussion is on the realistic return of value investing by Franko, than I do agree with most views posted.

It's possible in one particular good year where everything is in your favour. i think i have achieved that before.
So for 10 or 15, 20, 25, years 20-25%, WOW! i think i will be retired like Peter Lynch. Investing is really a Marathon Race not Sprint.

[starcraft_76]

Reading through this thread and tried to calculate my XIRR for 2013.
Is the following correct?

Date Value Remark
01-Jan-13 $(524,310.06) // Portfolio Value
29-Jan-13 $(353,419.90) // total purchase in 2013
29-Dec-13 $367,973.00 // total sales proceed in 2013
29-Dec-13 $26,517.00 // total div received in 2013
31-Dec-13 $601,687.60 // market value of portfolio
XIRR 2013 14.03%

Note:
- The portfolio value is roughly estimated only
- To be conservative, I presume all purchase is on Jan 2013, while all sales is on Dec 2013, and dividend on Dec 2013

[starcraft_76]

Reading through this thread and tried to calculate my XIRR for 2013.
Is the following correct?

Date Value Remark
01-Jan-13 $(524,310.06) // Portfolio Value
29-Jan-13 $(353,419.90) // total purchase in 2013
29-Dec-13 $367,973.00 // total sales proceed in 2013
29-Dec-13 $26,517.00 // total div received in 2013
31-Dec-13 $601,687.60 // market value of portfolio
XIRR 2013 14.03%

Note:
- The portfolio value is roughly estimated only
- To be conservative, I presume all purchase is on Jan 2013, while all sales is on Dec 2013, and dividend on Dec 2013

For me, I use some debt in my investment. So, the cost of debt should be considered also right? I added the debt cost as the following? Is this calculation correct then?

Date Value Remark
01-Jan-13 $(524,310.06) // Portfolio Value
29-Jan-13 $(353,419.90) // total purchase in 2013
29-Jan-13 $(7,716.21) // Debt cost
29-Dec-13 $367,973.00 // total sales proceed in 2013
29-Dec-13 $26,517.00 // total div received in 2013
31-Dec-13 $601,687.60 // market value of portfolio
XIRR 2013 13.00%

Note:
Again, the debt cost was presume occurred on jan 2013 to be conservative

[CityFarmer]

Reading through this thread and tried to calculate my XIRR for 2013.
Is the following correct?

Date Value Remark
01-Jan-13 $(524,310.06) // Portfolio Value
29-Jan-13 $(353,419.90) // total purchase in 2013
29-Dec-13 $367,973.00 // total sales proceed in 2013
29-Dec-13 $26,517.00 // total div received in 2013
31-Dec-13 $601,687.60 // market value of portfolio
XIRR 2013 14.03%

Note:
- The portfolio value is roughly estimated only
- To be conservative, I presume all purchase is on Jan 2013, while all sales is on Dec 2013, and dividend on Dec 2013

For me, I use some debt in my investment. So, the cost of debt should be considered also right? I added the debt cost as the following? Is this calculation correct then?

Date Value Remark
01-Jan-13 $(524,310.06) // Portfolio Value
29-Jan-13 $(353,419.90) // total purchase in 2013
29-Jan-13 $(7,716.21) // Debt cost
29-Dec-13 $367,973.00 // total sales proceed in 2013
29-Dec-13 $26,517.00 // total div received in 2013
31-Dec-13 $601,687.60 // market value of portfolio
XIRR 2013 13.00%

Note:
Again, the debt cost was presume occurred on jan 2013 to be conservative

I assume the above is an example, rather than actual one. XIRR allows actual date of sale/buy/div/expense with its cash flow, without any extra work.

The XIRR is meant to calculate return of irregular cash flow. As long as a cash flow belongs to equity investment, it should be included.

The example look fine to me.

[greypiggi]

My net returns on a 35% (leverage to total asset) ratio of bonds, equities, cash and speculative has been :

2011 : -1.62%
2012 : 8.74%
2013 : 10.79%
2014 : 1.34% YTD as of 8th May 2014

Portfolio allocation in the period ranges as :

Cash : 10-15%
Bonds : 36-42%
Equities : 25-35%
Speculative : 4-6%

I just added hedge funds at about 10% this year of allocation and the money comes from shifting down bond allocation mainly. I do not include PE investments as these are too illiquid and cannot be traded. Bonds are self managed bond ladder with about 40 names. Equities mix of discretionary and self managed, speculative is a lot of structured notes and US tech names.

My main concern is this year performance to date. So far tech stocks has been bashed bad and only bonds and european and some SG counters have been doing well. The other problem i have is that i dont know how to do a proper denominator for invested amount. So to be conservative, i use the total value at the end of the year to be the denominator. Makes sense?

Will welcome any useful constructive comments and happy to share thinking if anyone is curious too.

[csl123]

My net returns on a 35% (leverage to total asset) ratio of bonds, equities, cash and speculative has been :

2011 : -1.62%
2012 : 8.74%
2013 : 10.79%
2014 : 1.34% YTD as of 8th May 2014

Portfolio allocation in the period ranges as :

Cash : 10-15%
Bonds : 36-42%
Equities : 25-35%
Speculative : 4-6%

I just added hedge funds at about 10% this year of allocation and the money comes from shifting down bond allocation mainly. I do not include PE investments as these are too illiquid and cannot be traded. Bonds are self managed bond ladder with about 40 names. Equities mix of discretionary and self managed, speculative is a lot of structured notes and US tech names.

My main concern is this year performance to date. So far tech stocks has been bashed bad and only bonds and european and some SG counters have been doing well. The other problem i have is that i dont know how to do a proper denominator for invested amount. So to be conservative, i use the total value at the end of the year to be the denominator. Makes sense?

Will welcome any useful constructive comments and happy to share thinking if anyone is curious too.

Here are some comments.

1) Seems like you are in capital preservation due to higher bond allocation?
2) Possible to use NAV method to calculate fund performance.
3) Might need to have a benchmark(MSCI World or S&P500) to determine fund performance.
4) Do you have an active or passive strategy for each asset class
- For equities, you seem to be active, but not so clear on your strategy (value, business cycle)
- For bonds, seems like you are already active.

[ValueMaster]

My net returns on a 35% (leverage to total asset) ratio of bonds, equities, cash and speculative has been :

2011 : -1.62%
2012 : 8.74%
2013 : 10.79%
2014 : 1.34% YTD as of 8th May 2014

Portfolio allocation in the period ranges as :

Cash : 10-15%
Bonds : 36-42%
Equities : 25-35%
Speculative : 4-6%

I just added hedge funds at about 10% this year of allocation and the money comes from shifting down bond allocation mainly. I do not include PE investments as these are too illiquid and cannot be traded. Bonds are self managed bond ladder with about 40 names. Equities mix of discretionary and self managed, speculative is a lot of structured notes and US tech names.

My main concern is this year performance to date. So far tech stocks has been bashed bad and only bonds and european and some SG counters have been doing well. The other problem i have is that i dont know how to do a proper denominator for invested amount. So to be conservative, i use the total value at the end of the year to be the denominator. Makes sense?

Will welcome any useful constructive comments and happy to share thinking if anyone is curious too.

your returns seems pretty low
might as well go 50% equity ETFs and 50% bond ETFs? you would had made at least 10% annual compounded returns over the last few years

also i think you are holding too much cash, better to stay fully vested than time the market

[greypiggi]

Valuemaster,

Msci world index is up 7.53% annualized in the 3 years I started having money to invest. Bond returns via Barclays agg bond index is about 3% last 3 years. So effective returns on 50/50 split like you said is about 5% after fees though it would
be in usd which has lost vs sgd. So if I compare with how I did, I am about 4.5% overall higher in 3 years and in sgd but with less diversification compared to the 2 etf passive option.

Of course if we picked msci Asia would have done badly and
If we picked msci USA would have done spectacularly! But your point is valid. Is it worth the effort and risk for say 1.5% more per year.

As for cash, agree that 15% is high. But I have private business commitments. If I remove these, effective cash is closer to 6-7%.

[greypiggi]

Here are some comments.

1) Seems like you are in capital preservation due to higher bond allocation?
2) Possible to use NAV method to calculate fund performance.
3) Might need to have a benchmark(MSCI World or S&P500) to determine fund performance.
4) Do you have an active or passive strategy for each asset class
- For equities, you seem to be active, but not so clear on your strategy (value, business cycle)
- For bonds, seems like you are already active.

Thanks cs123, my replies.

1) yes. Preservation as this is capital from business
exit for rest of my life. So my goal is to generate enough for living expenses and yet still grow the capital base. Bond coupons using ytm today already pay for 125% of annual expenses.

2) what do u mean by nav. For eg start of 2012,
Say I had 10m invested but I put in cash throughout the year, so end of year
I added 2m. What I do now is to use 12m as denominator to calculate returns. I know if we account for time of injections, my returns are slightly better but no easy way leh...

3) yes I benchmark against discretionary portfolios of private banks. Usually balanced portfolio. So far I am ahead 3% in the 3years.

4) you have given me food for thought. I have no consistent strategy. Goal for core equity is to make 6.5% per annum. I buy
Mostly are dividend stocks, some are growth, some Are opportunistic. For eg europeAn, em markets. I usually buy funds or discretionary themes from the Pb. Direct stocks only in Sg market. Speculative goal is to make 10%. Mainly tech stock picks and structured notes like sell puts and calls. Bond goal
Is 4.5% returns.

Any sharing by anyone is much appreciated.