What Investment Measurement is Important to You?

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cannew
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What Investment Measurement is Important to You?

Post by cannew »

I just checked the Market Value of our portfolio (which I normally do once a year) and found that as of today our portfolio is up 33% from Dec 2015. Is that important? Not to us as we are retired, don't buy and sell and have been holding for many years. It wouldn't matter if it was down 33% because nothing would have changed.

For us the fact that our Income is up 11% from Dec 2015 is important. We're getting more income than last year without doing anything, just holding. To us the 33% increase is a Feel Good measurement, because its up, while the 11% is a Feel Great measurement because its money we actually received.
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Re: What Investment Measurement is Important to You?

Post by ghariton »

Only two measurements are important to me, although I may look at a lot of others for fun. On a yearly basis:

(1) Was my total return above or below the target in my long run plan. That tells me how much I can spend (or give away) in the coming year. Note that I don t HAVE to spend this, and seldom do. It s the amount that I can spend and still be within my plan.

(2) Was my total return above or below an appropriate benchmark, given my asset allocation. Very large deviations for several years will lead me to reviewing my investment strategy. Hasn t happened yet, but might.

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Shakespeare
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Re: What Investment Measurement is Important to You?

Post by Shakespeare »

Is my 12-month rolling delta [difference between month-end dollar values] positive or negative?

If it is positive, I don't worry.

If it isn't, I think about cutting spending.

This ignores inflation. But my Canadian pension (CPP/OAS/pension) is indexed and I'm content to let the dollar value inflate away as long as inflation remains modest. In any case, the 2021 RRB is 17% of the portfolio.
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Re: What Investment Measurement is Important to You?

Post by AltaRed »

I look at Total Return with the addition that I also want to look at CAGR multi-year returns on a 3-5 year basis (will add 10 year to the process* once I have 10 year data). I don't really compare with benchmarks in any sophisticated way mostly because I am too lazy to create the appropriate benchmark, and don't feel it is all that important for me.

I only intuitively (and indirectly) look at income (dividends, Other Income and sometimes cap gains) year-to-year when I do my tax returns, and more importantly via Quicken, how my total income exceeds (or not) annual expenses. This helps me decide how much I may want to spend on travel and other social/recreational activities the following year.

* Cannot yet do 10 year CAGR due to the way assets were divided in a 2008 divorce settlement. Intuitively, if my 10 year rolling CAGR can be 6% or better, I feel on top of the world.
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Re: What Investment Measurement is Important to You?

Post by brad911 »

I first look at the growth of my cashflow and if it matches my 6-8% target set for the portfolio. Next I look at my total return and whether that matches my goal of 8-10%. Next I look at how the tax efficiency ($ to be paid) worked out.
I might look at a benchmark but really I'm not that interested overall with beating an index or collection of indices.
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Re: What Investment Measurement is Important to You?

Post by pmj »

ISTM that yield expressed as a percentage is important at the time of buying a investment - "I want as much income as possible from this purchase".
But once I've bought it, I'm interested in income in $, and whether that $ income is increasing each year.
In that context, neither the % value of income/cost nor the % value of income/current price is relevant. Just income in $.

Income/current price is particularly misleading because it fluctuates from day to day, even though the $ income stays the same. A measure which fluctuates day-to-day doesn't provide value in the context of assessing the performance of a stock in a long-term holding portfolio. It does provide value if one is contemplating replacing one stock with another - "will the new stock provide more income?".

I wouldn't use income/cost as an absolute measure, because it needs context. But as an _internal_ measure of the relative performance of a particular stock, it would allow evaluation over a period of time.
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Shakespeare
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Re: What Investment Measurement is Important to You?

Post by Shakespeare »

My spreadsheet also estimates 12 month trailing returns based on Equation 4, gives the average of Equation 4 since retirement [which isn't independent because of overlap], computes the portfolio IRR since retirement, computes the TFSA IRR since inception, and computes the total return dollar value including net expenses.

FWIW, today's values are:

12-mo return: 11.2%
Average retirement return [statistically flawed by overlap]: 8.0%
Maximum portfolio total return date: today

(Total + net expenses is about 2.4 times today's value.)

IRR post retirement (18 years): 8.6%

TFSA IRR: 11.9%.

I know several here have done better but I'm happy with these results.

Note all values are corrected for expenses [net withdrawals].

Added: allocation has ranged from 40% to 60% equities. Current allocation is 55% equities.
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Re: What Investment Measurement is Important to You?

Post by adrian2 »

cannew wrote:I just checked the Market Value of our portfolio (which I normally do once a year) and found that as of today our portfolio is up 33% from Dec 2015. Is that important? Not to us as we are retired, don't buy and sell and have been holding for many years. It wouldn't matter if it was down 33% because nothing would have changed.

For us the fact that our Income is up 11% from Dec 2015 is important. We're getting more income than last year without doing anything, just holding. To us the 33% increase is a Feel Good measurement, because its up, while the 11% is a Feel Great measurement because its money we actually received.
Aren't you DRIP-ing the dividends?
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Re: What Investment Measurement is Important to You?

Post by SQRT »

Total return annual,3,5,10years. Yield on market. P/E of large holdings, div growth (percent and dollars). Check the market several times a day but hardly ever trade.
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Re: What Investment Measurement is Important to You?

Post by Garthd »

when I was working and saving the measurement was a dollar value each year. This was a combination of saving and portfolio return, this ensured I reached the goal on time. Excess return shortened the time and increased the ultimate goal. inadequate return meant saving more.

Post retirement I know the sustainable withdrawal rate of my portfolio to age 90 with 90% probability and make sure the portfolio return is greater or I would reduce expenses. no new Porsche for the wife.

As the porfolio grows meaningfully above the SWR we are making a plan for a significant charitable donation.

As I have been reading a number of charitable foundations financial reports I am amazed at the lengths they go to hide salaries. There seems to be little transparency in this business.
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Re: What Investment Measurement is Important to You?

Post by Garthd »

Very much like SQRT on a daily basis. Review daily and adjust every couple years.
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Re: What Investment Measurement is Important to You?

Post by Flaccidsteele »

I just look at net worth and income.
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cannew
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Re: What Investment Measurement is Important to You?

Post by cannew »

adrian2 wrote:
cannew wrote:I just checked the Market Value of our portfolio (which I normally do once a year) and found that as of today our portfolio is up 33% from Dec 2015. Is that important? Not to us as we are retired, don't buy and sell and have been holding for many years. It wouldn't matter if it was down 33% because nothing would have changed.

For us the fact that our Income is up 11% from Dec 2015 is important. We're getting more income than last year without doing anything, just holding. To us the 33% increase is a Feel Good measurement, because its up, while the 11% is a Feel Great measurement because its money we actually received.
Aren't you DRIP-ing the dividends?
Yes we do reinvest probably 60% of our dividends, and they generate additional income. But it's still income when we receive it and we can withdraw, reinvest or just leave it as cash.
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Re: What Investment Measurement is Important to You?

Post by scomac »

Flaccidsteele wrote:I just look at net worth and income.
That works for me too. Segmented returns year-to-year for the various accounts are less important.

I've got 15 years of data now for several accounts. IRR ~8.5% across all accounts over that time frame currently sitting at 55% equity. Very similar to Shakes results and equally satisfied.
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Re: What Investment Measurement is Important to You?

Post by Insomniac »

I look at total portfolio value (registered accounts + non-registered accounts + GICs + cash), estimated income and asset allocation.

Look at estimated income for tax planning purposes.

Check asset allocation to see if it's getting out of wack and needs to be adjusted.

Look at total portfolio value to see if changes need to be looked into. Serious drops may mean belt tightening.
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Re: What Investment Measurement is Important to You?

Post by GreatLaker »

Total return and net worth. I compare to a plan that is based on a conservative (I hope) 4% nominal return. If I drift from that plan for too long I need to review and consider changing something. Portfolio yield is a secondary consideration.

Years ago I picked up a business card for some get rich quick scheme that said "Do you want to make SERIOUS MONEY?". No, I don't want serious money. I want money that likes to go out and have some fun. While I plan to leave an estate and make some charitable donations, I have no objection to using up some of my capital. It's my reward. I am considering using longinvest's VPW spreadsheet to assist in determining what I can spend.

My parents really enjoyed their pre and post-retirement years with a nice home, recreational property and lots of travel. I like to joke that they tried hard to spend their kids' inheritance but really, I admire how active and happy they were. Remembering that means more to me than an inheritance ever will.
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Re: What Investment Measurement is Important to You?

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GreatLaker wrote:Remembering that means more to me than an inheritance ever will.
:thumbsup: :thumbsup:
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Re: What Investment Measurement is Important to You?

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My parents really enjoyed their pre and post-retirement years with a nice home, recreational property and lots of travel. I like to joke that they tried hard to spend their kids' inheritance but really, I admire how active and happy they were. Remembering that means more to me than an inheritance ever will.
+ :thumbsup:
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Re: What Investment Measurement is Important to You?

Post by DenisD »

The most important number I'd like to know would be my die broke withdrawal rate. Unfortunately, that's unavailable at the moment.

Moving on to measures of past performance, I'm most interested in comparing my equity returns with benchmarks. That's for equities as a whole and individual equity asset classes. . 5 and 10 year rolling returns are more important than yearly returns.

I have 13 equity asset classes. 4 of them are represented by cap-weighted index ETFs, 5 are stock screens, 3 are fundamental index ETFs and 1 is discretionary.
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Re: What Investment Measurement is Important to You?

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Garthd wrote:...Post retirement I know the sustainable withdrawal rate of my portfolio to age 90 with 90% probability and make sure the portfolio return is greater or I would reduce expenses. no new Porsche for the wife.
As the porfolio grows meaningfully above the SWR we are making a plan for a significant charitable donation.

As I have been reading a number of charitable foundations financial reports I am amazed at the lengths they go to hide salaries. There seems to be little transparency in this business.
Same here. My 2 numbers are total portfolio return and withdrawal rate. As long as the first meets or exceeds our plan and the second is equal to or less than plan, I am happy.

This year I increased my annual transfer to the kids by 30%. Plus I make the maximum contribution to the RESP for 5 grandchildren. As they turn 17, I am considering making TFSA contributions to them. I am thinking this will kick in after they have each received their $40k from the RESP.

More on this when the annual returns are in.
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Re: What Investment Measurement is Important to You?

Post by Descartes »

As I am still working, my measures are:

1. employment income savings rate after taxes
2. investment income - RESP income
3. net worth - RESP assets

The first is making sure I am on track with my cost containment and raw cash flow for investing.
The second is making sure I am on track in building up my future "homemade pension".
The last is making sure I feel good and superior about myself ..er I mean I am on track with the inheritance I want to provide to my family.

I check these things far too frequently but I excuse this compulsion to my wife as one of my hobbies.
It beats building bird houses anyway.
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Re: What Investment Measurement is Important to You?

Post by SQRT »

kcowan wrote:
This year I increased my annual transfer to the kids by 30%.
Keith, how have you set this up? Do they expect it every year? Any conditions? Dependency?
Cheers.
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Re: What Investment Measurement is Important to You?

Post by Spidey »

I guess almost all realistic/commonly-used investment yardsticks are important to me. However, most important would be net-worth and how my portfolio return compares to the FPX indexes.
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Re: What Investment Measurement is Important to You?

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SQRT wrote:
kcowan wrote:This year I increased my annual transfer to the kids by 30%.
Keith, how have you set this up? Do they expect it every year? Any conditions? Dependency?
Cheers.
I do it in two tranches. No conditions. They are both good so far. No behaviour changes needed. :D

There were two things that stimulated it. One was the cancer scare for my oldest. I thought I would consider substantially enhanced support if he did not recover from the radiation. So what the hey, let's share the wealth now.

The other was the continued buoyancy in the equity markets.

This is not an annual thing. Kind of like a COLA adjustment to a pension done periodically.
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Re: What Investment Measurement is Important to You?

Post by cannew »

SQRT wrote:
kcowan wrote:
This year I increased my annual transfer to the kids by 30%.
Keith, how have you set this up? Do they expect it every year? Any conditions? Dependency?
Cheers.
We Gifted some shares to them directly.
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