Early Retirement Extreme Forums

I want to track how I'm doing as an investor and track which asset classes performs best. This will be a tool for me when deciding how to allocate my capital (savings). It's nice to have an indication on how much each dollar saved will yield. So I did some calculations in a spreadsheet and here is what I came up with. I want to track this every year henceforth. I'd be curious to see if others make similar calculations, and how you performed. I've divided this post into paragraphs, one for each asset class. If the same category of assets have different risk (e.g. high/low risk stocks), then I plan to separate those as two different asset classes. I've also added some comments for each class.

Cash equivalents (8% of total portfolio as per 1st of January 2016)
0% yield
Cash, bank accounts with close to zero interest rate.
No need to measure yield - there is none!
The only interesting thing about cash equivalents is knowing how much I have and whether it makes up a big or small part of my total portfolio.

Savings accounts (14% of total portfolio as per 1st of January 2016)
2.6% yield
Bank accounts with highest possible interest rate.
Yield is measured using average interest rate throughout the year.

Medium risk stocks (14% of total portfoilio as per 1st of January 2016)
5.4% yield
This is basically money I have transferred to my trading account for buying/selling stocks. I started in July so the yield is basically for the last 6 months. The total portfolio value is the money I have transferred to the account. So if I transferred 100 by 2016-01-01, bought and sold stocks through the year, and the account value is 106 by the end of the year, my yield is 6%. If one stock drops 50%, it might reduce the account value to say 95. In that case my yield would be -5%.
I was initially unsure how to calculate the yield. Do I only include stocks I have sold, ie. cashed in the profits? What if I reinvested those profits? This would be too confusing and complex I think. Also, when deciding if and how much I want to invest in stocks, it is usually a matter of how much money I feel like I can transfer to the trading account, and measuring the yield this way answers the question "how much yield did I get on the money I invested so far?"
I have a mix of low/medium/high risk stocks in that account, so I just put it all under "medium risk stocks". Some are short term, others are long term. If this made up a substantial portion of my total portfolio, I would categorize further.

Real estate (64% of total portfolio as per 1st of January 2016)
17.6% yield
Money invested in real estate.
I had trouble figuring out how to measure yield here. The trouble comes in when you bought a property 1 or several years ago and want to figure out how much your yield was this year. I decided to use "financial result before taxes" divided by my equity in the properties. How should I measure equity? Using real (current) value of the properties, or what I bought them for initially? Then what of the loan balance? Should I include agent fees in the event of selling? I decided to use their real, current value (as per 1st of Jan) and subtract the corresponding loan balance. I did not include fees/taxes in the event of selling. Why? Because I don't have to sell in order to make use of the equity. If I want, I can call the bank and get a loan using the properties as security, and invest that cash in e.g. stocks. This better reflects the equity I have currently invested in real estate, equity that can be cashed out if I wish. Over time this will also reflect how my investments change in value, just like with stocks, so it compares well.
I would characterize the risk on this asset class as "medium". The fact real estate is in an all time high, plus the fact my equity is low compared to the loan balance (20%) pushes it towards "high risk". On the other hand, I've fixed the interest rate on the mortage and the real estate market is expected to continue a steady/slow rise in the next couple of years based on fundamentals. This pushes it towards "low".

Other comments:
- The yield is per today, so the stocks yield might change a lot by the end of the year. I will edit the post to make it count by 31st of Dec. [Update: post edited 2017-01-05]
- I use 1st of January as "value of total portfolio", because that is theoretically the date I decide how to allocate capital if I want to measure my performance on a yearly basis. That's the date your cards are dealt so to speak. Using e.g. 31st of Dec 2016 or average numbers would be confusing/backwards/not simple enough.
- What do I conclude from the above numbers? I conclude that I invest the money I save every month, and that my investments make an average yield of about 9% (7% if I include cash as an investment - what's more correct in your opinion?). Real estate has a better yield, and happily it makes up a bigger part of my investments. But I must be conscious about the risk involved with each investment and allocate accordingly. As my total portfolio grows, I'd like to reduce risk in the future.

So how did my fellow ERE forum members do this year? If your way of calculating yield differs from mine, I'd love to know the details.

I want to track how I'm doing as an investor and track which asset classes performs best. This will be a tool for me when deciding how to allocate my capital (savings).

Not intending to insult your intelligence here, it totally makes sense that you want to evaluate performance, but tread carefully, you don't want to equate past performance == future performance when deciding how to invest tomorrow, next month, or the following year.

Don't forget to factor in inflation for your cash allocation, whether you take government statistics (trustworthy?), or figure out a measure yourself.

Regarding stocks, there are several ways you can account, if you are measuring yield, just measure the dividends, if you want to include capital gains, track changes of the stock price too since purchase. At the moment, I take a monthly snapshot of my portfolio so I can chart it, but it doesn't mean much! I prefer to to only count my chickens once they're hatched, it's prudent to not to measure a gain before it's realised, as you could lose it all down the road.

You can do annualised returns, rolling returns, whatever tickles your fancy. I only really care about how much I invested, and how much it's worth should I want to cash out right now. I may choose to more do more analysis, but one of the benefits of the PP is it's stable, passive and isn't very exciting.

Your strategy depends on your investment style.

I'm interested in total return and how much was income (e.g. dividends/interest) vs. capital gains for the purposes of budgeting. Daily (not tracked longterm), monthly, & annually vs. major index (S&P 500). Daily & monthly are used for buy/sell decisions, looking to find market mispricing. Total returns should be measured with XIRR function to account for time value of deposits & disbursements.

Depending on the tax treatment of your portfolio, you may or may not want to track the effects of taxes.

If the returns don't beat inflation (or, more significantly, inflation and taxes), the only solution is to improve returns, thus tracking inflation is irrelevant to me in terms of portfolio performance as I'm trying to get the highest reliable returns possible.

Edit: I'll post 2016 totals once we're in January.

S&P 500 = +9.5% (reference)
My IRA combined with Roth IRA = +16.8%
My taxable account = +17%
US I-Bonds = +3.9%

Annual XIRR since 2009 = +14.3%, so this year was above average.

@ Gtoo: great result, tx for mentioning, gives me inspiration. My annual result before taxes over 2016 is 6,6 %. I have no stocks, but deposito's and I had a short Re investment that worked well.

Some very rough metrics:


Inert assets (owned housing and capital currently tied up in business -- roughly 35% of net worth):

About a +1% increase in book value.


Retirement account assets managed by "professionals" (about 13% NW):

About +10-11%.


Cash and short term savings vehicles (about 4% NW):

About +3%


Self-managed retirement account assets (about 21% NW):

Smaller account: +18%
Larger account: +20%


Self-managed non-retirement account assets (about 27% NW):

Lending Club: +7.5%
Brokerage Account: +37% (yes, its levered)

Note, these are intended to be combined as one portfolio since the former balances the latter, so the overall is about +22%.


The whole shebang averages out to about 12% overall and around 17.5% for the non-inert assets. Like the man sings: https://www.youtube.com/watch?v=VHJ3iZpfBRI

bla

15.5% Overall - 90% Stocks and 10% Cash

Only 10.36% return on the part of my portfolio semi-managed by me. I can pick funds, but no individual stocks as it's in my current 401k.

16.5% on the rest of my portfolio, which is entirely managed by me.

Silver Run Acquisitions, now Centennial Resources, was my biggest winner at 113%.

Note: Does not include dividends.

classical_Liberal wrote: @Dragline, how did you manage to beat inflation so handily with your cash? Is this repeatable?

Most of that is actually in 529 college savings accounts invested in ordinary bonds and "inflation protected" bonds. I just call it cash, because a good chunk of it is leaving the coop these days and I don't count on any positive income from it. The inflation protected component is actually VIPIX, which was up about 4.6% last year. The bond component is Vanguard total bond. So you could duplicate it by combining those. It usually has a small positive return, but occasionally is negative like in 2013. Last quarter was bad for those as well.

If you combine those with a couple other funds, you'd end up with something that resembles the Swedroe or Swenson portfolios. See https://portfoliocharts.com/portfolios/

bla

Happy to share and thanks for participating.

I'm afraid thats about all that is offered in that 529. Its really better for tax savings than investing.

My steadiest payer YOY is Lending Club but there's a learning curve and its better when matched with other investments. There are other threads about that.

i would imagine the best performers around here last year
were the Bitcoiners.

VTSAX (Vanguard total stock market index), 16% of my investment portfolio, gained 12.66% in 2016.
VFFVX (Vanguard target retirement 2055 fund), 84% of my investment portfolio, gained 8.88% in 2016.

My investments were up 12.9% in 2016, not including dividends.
About a 50/50 mix of individual stocks and indexes.
Individual stocks did a bit better vs indexes.
Best performer % wise were Siemens, bought at 81€ and now at 115, and Axa, bought at 17€ and now at 24, up 41%
Best performer in absolute unrealized gains was Royal Dutch Shell
Worst performer % wise was a small bet I placed on Banca Monte so far down 31%
Worst performer in absolute unrealized losses was Engie
I did not sell anything this year.

vexed87 wrote:

I want to track how I'm doing as an investor and track which asset classes performs best. This will be a tool for me when deciding how to allocate my capital (savings).

Not intending to insult your intelligence here, it totally makes sense that you want to evaluate performance, but tread carefully, you don't want to equate past performance == future performance when deciding how to invest tomorrow, next month, or the following year.

Yes, very good point.

What I meant is that I'm really just an "advanced beginner" investor, and practice is part of my learning. Hence, I wish to figure out what type of investments I'm comfortable with and what works for me. Part of knowing what works is looking at what kind of returns I'm getting from each asset class compared to relevant benchmarks.

I'm increasing my allocation to stocks in 2017, from 14% to around 20-25%.

Dragline wrote:My steadiest payer YOY is Lending Club but there's a learning curve and its better when matched with other investments. There are other threads about that.

Do you use site return or do your own calc? XIRR?

cmonkey wrote:

Dragline wrote:My steadiest payer YOY is Lending Club but there's a learning curve and its better when matched with other investments. There are other threads about that.

Do you use site return or do your own calc? XIRR?

For this, I just took the YTD statement of the net income (subtracting the defaults) and divided that by the average amount invested for the year. It's "close enough" for this exercise. It does happen to be close to the "Adjusted Net Annualized Return" this year, though.

Vanguard 2016 rate of return: 14.2%. Combination of favoring low-priced but volatile assets and some lucky trades.

LendingClub Net Annualized Return straight from their site = 7.59% with 15.14% weighted average interest and 21.6 month weighted average age of portfolio. I was not buying new notes in 2016. Using their Understanding Your Returns tool, I am right in the middle of the pack for similar accounts.

I also have a smaller amount in Fidelity with limited investment options that did about 0% in 2016 - oh well!

VTI Vanguard Total Stock Market ETF (75 % of portfolio): 14.30 % over 2016
VYM Vanguard High Dividend Yield ETF (25 % of portfolio): 9.21 % over 2016

Keeping our fingers crossed (but not too much )

Starting with individual stocks and moving a bit into ETF investing in the later half of 2016 yielded me 22.20%!
The TSX index yielded 19.11% for comparison.

For my first year I think that's pretty good! Especially considering I paid about 3K in investing tuition in Jan 2016. Foolishly sold an oil company at the bottom of the crash instead of doubling down.

For 2017 I'm significantly diversifying (into U.S and International market ETFs) compared to 2016. Should be an interesting year