What proportion of your portfolio is due to market growth ?

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What portion of your portfolio came from market growth ?

Poll ended at 28 Jan 2017 11:40

0-5%
1
6%
6-10%
1
6%
11-20%
1
6%
21-30%
3
19%
31-40%
2
13%
41-50%
1
6%
51-60%
2
13%
61-75%
1
6%
76-90%
1
6%
91-100%
3
19%
 
Total votes: 16

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Koogie
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What proportion of your portfolio is due to market growth ?

Post by Koogie »

There has been a lot of talk lately, as there often is at this time of year, about rates of return. It is often pointed out that a single yearly return is of little importance in the long run and that it is the the long term return which matters.

Considering that we all should be concerned then with the total long term return in our portfolios it beggars the question; what has yours been ?

What proportion of your portfolio has been a result of old fashioned hard work and saving and how much has been supplied by Mr. Market ?

Some people will only have a rough idea. Others will rush to their software or spreadsheets and be able to pin it down to the dime as of 15 mins. ago... in other words, it's only for feces and fun.
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Re: What proportion of your portfolio is due to market growth ?

Post by AltaRed »

Are you asking how much one exceeds (or not) benchmark indices growth? Additions and withdrawals will also impact the ablity to measure one's portfolio against such benchmarks.
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Re: What proportion of your portfolio is due to market growth ?

Post by BRIAN5000 »

AltaRed wrote:Are you asking how much one exceeds (or not) benchmark indices growth? Additions and withdrawals will also impact the ablity to measure one's portfolio against such benchmarks.
I thought he was asking something like if you have a million dollar portfolio how much of your own savings went into it

EG I invested $500,000 and now have a $1,000,000 portfolio. I have 50% of my own savings in my portfolio, Equities only.
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Re: What proportion of your portfolio is due to market growth ?

Post by AltaRed »

If that is what the OP meant, good luck with looking at 35+ years of records....if I even had them.
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Re: What proportion of your portfolio is due to market growth ?

Post by Flaccidsteele »

My answer would be "I don't know" which isn't in the poll.

Does the OP want to differentiate super savers from super investors?

What makes this important?
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Re: What proportion of your portfolio is due to market growth ?

Post by adrian2 »

Flaccidsteele wrote:My answer would be "I don't know" which isn't in the poll.
+1
Flaccidsteele wrote:What makes this important?
Investor A has had an investment career of 35 years, and 75% of the portfolio is due to market growth.
Investor B has had an investment career of 25 years, and 50% of the portfolio is due to market growth.
Investor C has had a similar trajectory to Investor A, but one year ago he has inherited / won the lottery / got some options granted from work maturing / and got a 10 million addition to the portfolio, which he invested for safety. Only 4% of his current portfolio is due to market growth

Who has been a smarter investor so far?
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Re: What proportion of your portfolio is due to market growth ?

Post by ig17 »

Koogie wrote:Considering that we all should be concerned then with the total long term return in our portfolios it beggars the question; what has yours been ?

What proportion of your portfolio has been a result of old fashioned hard work and saving and how much has been supplied by Mr. Market ?
The answer is a function of CAGR and time in the market.

25 year old doubles the portfolio in the first year of investing.
35 year old compounds at 7.2% for 10 years.
45 year old compounds at 3.6% for 20 years.

All 3 portfolios end up having the same split: 50% from savings, 50% from Mr. Market. What does that tell you?
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Re: What proportion of your portfolio is due to market growth ?

Post by Flaccidsteele »

How does it benefit me to know this? I'm not competing against anyone. How a person reaches financial security, I say good for them. That's great.

My parents are rabid savers with a low rate of compound. Some people save less and have a high rate of compound. Others "win the lottery". That's great.
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Re: What proportion of your portfolio is due to market growth ?

Post by ig17 »

Flaccidsteele wrote:How does it benefit me to know this?
No idea. I don't understand the purpose of this poll.
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Re: What proportion of your portfolio is due to market growth ?

Post by Koogie »

BRIAN5000 wrote:I thought he was asking something like if you have a million dollar portfolio how much of your own savings went into it
EG I invested $500,000 and now have a $1,000,000 portfolio. I have 50% of my own savings in my portfolio, Equities only.
Entirely correct.
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Re: What proportion of your portfolio is due to market growth ?

Post by Koogie »

AltaRed wrote:If that is what the OP meant, good luck with looking at 35+ years of records....if I even had them.
"Some people will only have a rough idea.
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Re: What proportion of your portfolio is due to market growth ?

Post by AltaRed »

ig17 wrote:No idea. I don't understand the purpose of this poll.
:thumbsup: As correctly pointed out by you and Adrian2. The variables are too broad to be meaningful, but the discussion shows us there are several ways to one's current Net Worth.
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Re: What proportion of your portfolio is due to market growth ?

Post by Koogie »

ig17 wrote:
Flaccidsteele wrote:How does it benefit me to know this?
No idea. I don't understand the purpose of this poll.
It might not benefit you and/or you might not understand the purpose of every thread. Others can or do. I should think that obvious.
Feel free to read the explanation given upthread and/or not to participate. It's a free internet, after all.

I intended it as a very rough means to measure which has been more important in the long run, saving or investing as a component of your current portfolio. Some will have a portfolio comprised mostly of savings, invested conservatively, so will show little growth.
Others might have a smaller kernel but invested more aggressively and have a portfolio comprised more of market returns.
The poll won't show that mix of course, nor the time frame. But that is what can be expanded on in your commentary.
It'd be damn hard to compose a poll to measure all three of those main factors.

As to those who have been invested for 50 years and can't "come up with the records" Relax. It's not a tax audit. Take a guess.
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Re: What proportion of your portfolio is due to market growth ?

Post by BRIAN5000 »

AltaRed wrote:If that is what the OP meant, good luck with looking at 35+ years of records....if I even had them.
Well I was thinking you had to have this cause this is the ACB of your portfolio, then a said forget it and walked to Timmies for a large Triple X Double and a triple chocolate Lava muffin now I'm confused.

I think it's sort of like yield on cost something to look at for fun.
I thought he was asking something like if you have a million dollar portfolio how much of your own savings went into it

EG I invested $500,000 and now have a $1,000,000 portfolio. I have 50% of my own savings in my portfolio, Equities only.
Going back to my example if I had a dividend yield of 3% for multiple years "money I got with no work" is that subtracted from my original $500,000?

Thinking about this a fellow in my investment club was saying he only had $270,000 of his own money for every million dollars in his portfolio I bet he was subtracting those dividends.

When younger I was looking for ways to invest my money to grow without having to do any "work" dividend investing and rental real estate seemed to fit the bill.
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Re: What proportion of your portfolio is due to market growth ?

Post by AltaRed »

BRIAN5000 wrote:
AltaRed wrote:If that is what the OP meant, good luck with looking at 35+ years of records....if I even had them.
Well I was thinking you had to have this cause this is the ACB of your portfolio, then a said forget it and walked to Timmies for a large Triple X Double and a triple chocolate Lava muffin now I'm confused.
ACB could/would include compounding of portfolio income re-invested, so much of ACB could be from that income stream, not from portfolio contributions. Bottom line is one would ONLY know if they had a record of all "transfer ins" and "transfers out" to provide a net contribution. Some one with a relatively short investing history MIGHT have these figures but I doubt anyone else does, especially those with significant life events wreaking havoc with the portfolio, e.g. divorce settlement, deemed disposition of assets due to ex-pat assignments, etc.
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Re: What proportion of your portfolio is due to market growth ?

Post by BRIAN5000 »

I'm not competing against anyone.
Thinking about this a fellow in my investment club was saying he only had $270,000 of his own money for every million dollars in his portfolio I bet he was subtracting those dividends.
I may or may not compete but I compare. How could this fellow be doing so much better then myself if we started at about the same time and invest in generally the same stocks? Maybe I'm doing something wrong, maybe he has a better system or maybe he's just calculating different, I think it's the latter.
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Re: What proportion of your portfolio is due to market growth ?

Post by cannew »

I track my total investment, which includes all funds invested, gains reinvested & dividends reinvested. Once a year or so I calculate the market value of my holdings and I guess the difference is what your asking for? Currently it's 23%. When the market dropped in 2008\2009 I was was down 28%, so that's why I don't worry too much about the gain or loss in the value of my portfolio.
As I've mentioned many times, we care about the income our portfolios generates and thankfully its been going up each year since we switched to DG investing well before 2008\2009.
Guess the question is would my income grow if the market dropped 30% or more? Who knows but I feel confident it would not drop significantly.
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Re: What proportion of your portfolio is due to market growth ?

Post by AltaRed »

Cannew, this is a little off topic for this particular thread, but what you do can be quite satisfactory to track cash flow generation and growth in that income stream during retirement, but measuring income and income growth only is woefully inadequate as a financial plan, when one is building one's portfolio over the decades in preparation for retirement. It is also woefully inadequate for those retirees that have to deplete capital via 4% SWR (or some other mechanism) during withdrawal. IOW, that system doesn't work for the vast majority of investors and is thus not helpful for the vast majority of FWF membership.
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Re: What proportion of your portfolio is due to market growth ?

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AltaRed wrote:
BRIAN5000 wrote:
AltaRed wrote:If that is what the OP meant, good luck with looking at 35+ years of records....if I even had them.
Well I was thinking you had to have this cause this is the ACB of your portfolio, then a said forget it and walked to Timmies for a large Triple X Double and a triple chocolate Lava muffin now I'm confused.
ACB could/would include compounding of portfolio income re-invested, so much of ACB could be from that income stream, not from portfolio contributions.
Yes, indeed. ACB can be quite far from what the OP is looking for.

While I generally do not DRIP anything, I do make an exception for Mawer New Canada (small caps) which has been closed to new investors for quite a while.
$18k = original investment (1999 to 2000)
$71k = reinvested distributions (making it $89k ACB)
$209k = current market value
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Re: What proportion of your portfolio is due to market growth ?

Post by DenisD »

Well, I've taken more money out of my portfolio then I had when I retired nearly 25 years ago. Does that make me 100%? 200%? ... ? :)
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Re: What proportion of your portfolio is due to market growth ?

Post by Spidey »

Most of us use internal rate of return calculations to differentiate the market growth proportion of our portfolio and that's the number we are most concerned with. The question regarding how much of the portfolio is due to saving is rather complicated and may not tell that much about net worth. For example, if investor A paid down their mortgage in their young life and then started investing, they may have less portfolio growth but equal or greater net-worth to investor B who concentrated mostly on investing. I would guess 50%.
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Re: What proportion of your portfolio is due to market growth ?

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AltaRed wrote:Cannew, this is a little off topic for this particular thread, but what you do can be quite satisfactory to track cash flow generation and growth in that income stream during retirement, but measuring income and income growth only is woefully inadequate as a financial plan, when one is building one's portfolio over the decades in preparation for retirement. It is also woefully inadequate for those retirees that have to deplete capital via 4% SWR (or some other mechanism) during withdrawal. IOW, that system doesn't work for the vast majority of investors and is thus not helpful for the vast majority of FWF membership.
I used to feel that way and because we did not have any company pension and worried we'd out live our savings/investments. Our track record on investment returns looked like a roller coaster, but not growing sufficiently to make us feel secure. Not to repeat myself but we've gotten our kids and grand kids investing for Income, not growth. For them it's not been that long but they are sticking with a select group of stocks and the income growth is exceeding expectations and should it continue, with expected deviations. Their income in 25 to 30 years will provide them with more than enough income to retire comfortably. We do expect their capital to grow along with the income, but its the income they'll monitor. And they will now receive a healthy contribution for us.
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Re: What proportion of your portfolio is due to market growth ?

Post by gobsmack »

cannew wrote:For them it's not been that long but they are sticking with a select group of stocks and the income growth is exceeding expectations and should it continue, with expected deviations. Their income in 25 to 30 years will provide them with more than enough income to retire comfortably.
Therein lies the problem. It may continue or it may not. It is a game of probabilities. When people advocate tracking an index or diversifying by investing overseas, they are trying to mitigate risk. They are trying to increase the probability of the desired outcome.
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Re: What proportion of your portfolio is due to market growth ?

Post by pmj »

ISTM that the essence of this thread was a simple Q - what did you achieve? The Q was, maybe, somewhat ambiguous, but that's life!
It wasn't a Q requesting advice for others.
As such, there are no wrong answers.
Not agreeing with another's approach is also just a fact of life. It doesn't mean that that other approach is wrong.
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Re: What proportion of your portfolio is due to market growth ?

Post by cannew »

gobsmack wrote:
cannew wrote:For them it's not been that long but they are sticking with a select group of stocks and the income growth is exceeding expectations and should it continue, with expected deviations. Their income in 25 to 30 years will provide them with more than enough income to retire comfortably.
Therein lies the problem. It may continue or it may not. It is a game of probabilities. When people advocate tracking an index or diversifying by investing overseas, they are trying to mitigate risk. They are trying to increase the probability of the desired outcome.
We don't recommend others do as we did, but for our family, they've seen our results over the years and are happy to follow our path. There are no guarantees and thing change, but we think we've reduced our risk by sticking with only large, well established, long paying and growing dividends. Just passing on our experiences and others must choose the path they feel most comfortable with.
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