Wednesday, January 20, 2016

Real life portfolio performance 2015 and retrospective


2015 Values
Performance indicator
Comments
Absolute return
$, K
%
This is without taking into account accumulated $ 48 K
-25
-9
Relative return
S&P 500, %
Portfolio, %
 Exposure to emerging markets and energy sectors
0.8
- 9
Cash accumulated in 2010 money
Planned $, K
Actual $, K
On target.
48
48
Personal plan
in 2010 money
Planned $, K
330
Actual $, K
244

The  target is not becoming currently achievable, as at the beginning of the year I have had only $244 K in 2010 money, so I had to reduce it for 2016, so it is realistic:
Year
2008
2010
2011
2012
2013
2014
2015
2016
Money of the day
actual
153,400
119,800
165,600
226,800
298,400
288,608
295,536

Target





370,000

350,000
Inflation %

2
3.5
3
4
4
3
4
Cumulative inflation

1.02
1.06
1.09
1.13
1.18
1.21
1.26
2010 money
153,400
117,451
156,967
209,032
265,244
244,583
244,244
277,777
In another words if in 2010 you would have $ 10,000 and keep it, it worth $7,930 today.
Performance of my investments over the last 5 years (all in €):

2012
2013
2014
2015
2016
Money of the day invested – cumulative
44,460
173,770
189,638
202,593
286,492
Shares value -
44,886
180,827
163,000
155,745
208,391
Inflation adjusted U.S.
45,794
182,108
205,895
225,416
312,600
Inflation adjusted U.K.
45,883
182,202
205,993
227,706
314,981
S&P 500
48,639
217,099
262,768
277,947
367,232






Free cash
94,500
23,454
53,087
92,386
21,093
Dividends received


5,719
5,321

If invested in S&P 500


4,730
5,559

Notes: for 2016 this is an assumption that S&P 500 will be in line with the inflation and will growth by 4%.  However, value of my today is as of today. If they will perform in line with S&P500 they would worth ~ 220 K.
        I was focusing on dividends, while sitting on the pile of cash.  In a way in prevented me for going even in a deeper loss.  In 2014 it was a winners, as  I received almost 1,000 a year more.  By 2015 S&P500 would outperform.
Financial independence portfolio performance 2012-2015. Financial independence from the very beggining http://www.niterainbow.com
         I was thinking long and hard on whether to publish this performance comparison. It would actually be even grimmer, as EUR lost to USD almost 20% over the period of 4 years.  This tendency (EUR depreciating to USD) is likely to accelerate.  Western Europe allowed itself luxury of sanctions, conflicts and indulging into expensive politicking.
Admittedly, many funds underperformed, this should not be treated as an excuse:

2012
2013
2014
2015
Vanguard FTSE 100

18.5%
0.64%
-1.4%
Vanguard Emerging markets

-4%
1.1%
-15.5%
U.K. Government Bond

-4.2%
14.8%
0.3%
S&P500
13.4%
22.1%
12.8%
0.8%
DAX (German market)
31.8%
21.3%
3.9%
-5.64%
Mine
1.0 %
4.1%
-14%
- 23.1 %
Mainly for the same reason. In the UK (FTSE 100) – 12.9 % of the index are energy companies aka oil & gas.
          On the other hand, many of the Energy (euphemism for  oil & gas) companies lost between 20 to 50% of the market value last 18 months.  This was a good example on why individual stocks selected wrongly could compromise your goals. The gap over 5 years is 160 K! If I would simply keep all the money on a bank account, I would have today 286 K, instead of 208 K.
          The results made me thinking about effectiveness of my investment strategy and the emotional attachments.  I have now committed to invest in index ETFs (exchange-traded funds) in S&P 500, DAX (German market) and some bond ETFs.  I will consider FTSE, however the UK is now actively threatening to break up from EU, while major manufacturers (Rolls Royce, Jaguar Land Rover) are moving new plants overseas only.  
I will only do the speculative investment with side and unexpected income above my annual targets.

2 comments:

  1. Thanks for your courage to share these numbers. It is easy to share positive things.
    When I was having a very bad month (-30k) one commenter said "Wow, why would you let the stock market influence your personal life? Buy index funds and relax!" (https://eurfi.wordpress.com/2014/11/02/october-2014-networth-and-expenses-a-disaster/)
    At first it may sound a little bit harsh, but he is right. If the emotional attachment is too high, we should look for alternatives.
    And January 2016 started also very bad for me. After a successful 2015 I was maybe a little bit too confident. But we will see how it turns out in my January post at the beginning of February. Maybe the worst decline is over...

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    Replies
    1. Hi EurFI,
      Thank you for stopping by. To be perfectly honest I was surprised myself. Looking back I somewhat agreed with the commentator and I am planning to do it myself. I think it is still important to invest in the individual stocks and aim to beat the market. If everybody will stick with the index funds there will be no incentive to perform for the companies. The decline could be over, although I do not think so but I think the cycles are shorten now and we should see the declines and raises much more often than before.

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