2017 results thread

[rkbabang]

A lot of people on the board are very focused on beating the index and that's a worthy and legitimate goal for investment managers. But in real life that doesn't matter all that much. In real life in a successful investment strategy is one that meets the goals it was setup to achieve.

 

I agree that meeting the goals is important, but measuring whether in the long run you can outperform a strategy of putting 100% of new cash added immediately into cheap passive indexing, either in absolute returns or in some long term risk adjusted measure (over a whole economic cycle), is a helpful sanity check for whether or not you're right to be an active investor.

 

You can feel great about your investment returns like me in the last couple of years thinking you're way ahead then find that after accounting for new cash added and currency windfalls you only beat the S&P500 Total Return Index by a few percent each year, far less outperformance then you'd have guessed from how well each decision turned out.

 

I suspect it has a lot to do with riding BRK down to $124 in my case before going in even heavier at the market low, and seeing the whole market rise alongside it. So I made some great decisions but only affecting 15-25% of my portfolio and each only being a modest amount better than a decision to buy the index would have been.

 

+1.  This is exactly why I track it.  If I can't beat an index fund then what am I even doing?  According to Fidelity where all of my actively managed assets are (I have my 401K for work somewhere else, but those are in index funds so I don't track those when calculating my returns) I have an annualized return of a little over 12% over the last 10 years and according to Fidelity the S&P500 has done 8.5% annualized over the same period.  I wonder how good a return that is considering my time spent.  On the other hand I enjoy it, so I guess my hobby pays me a little bit.  Beats golf.

 

[rolling]

A lot of people on the board are very focused on beating the index and that's a worthy and legitimate goal for investment managers. But in real life that doesn't matter all that much. In real life in a successful investment strategy is one that meets the goals it was setup to achieve.

 

I agree that meeting the goals is important, but measuring whether in the long run you can outperform a strategy of putting 100% of new cash added immediately into cheap passive indexing, either in absolute returns or in some long term risk adjusted measure (over a whole economic cycle), is a helpful sanity check for whether or not you're right to be an active investor.

 

You can feel great about your investment returns like me in the last couple of years thinking you're way ahead then find that after accounting for new cash added and currency windfalls you only beat the S&P500 Total Return Index by a few percent each year, far less outperformance then you'd have guessed from how well each decision turned out.

 

I suspect it has a lot to do with riding BRK down to $124 in my case before going in even heavier at the market low, and seeing the whole market rise alongside it. So I made some great decisions but only affecting 15-25% of my portfolio and each only being a modest amount better than a decision to buy the index would have been.

 

+1.  This is exactly why I track it.  If I can't beat an index fund then what am I even doing?  According to Fidelity where all of my actively managed assets are (I have my 401K for work somewhere else, but those are in index funds so I don't track those when calculating my returns) I have an annualized return of a little over 12% over the last 10 years and according to Fidelity the S&P500 has done 8.5% annualized over the same period.  I wonder how good a return that is considering my time spent.  On the other hand I enjoy it, so I guess my hobby pays me a little bit.  Beats golf.

My opinion is the same. However, it is important to include both market cycles (bull and bear), since our portfolio may be more (or less defensive) than the index.

Also agree about the hobby part. However, our concentration is always higher than the index (in my case much much higher) and, as such, the risk is much higher. As such, a slight (in my case substantial) overperformance might be needed to an identical risk adjusted return. If you routinely own 3 small caps, you might need to beat the index by 5% or more just to have a comparable return. If you can, then it is a cheap hobby :)

[bbarberayr]

A 12% annual return will drive big gains compared to an 8.5% gain over longer period of time.  If you take a 20 year period, an 8.5% return turns $100,000 into $511,200 and a 12% return turns $100,000 into $964,600, almost double, definitely worth the effort in my book!

[rkbabang]

A 12% annual return will drive big gains compared to an 8.5% gain over longer period of time.  If you take a 20 year period, an 8.5% return turns $100,000 into $511,200 and a 12% return turns $100,000 into $964,600, almost double, definitely worth the effort in my book!

 

Only time will tell if I can do that for 20 years though.  I'm half way there.

 

[fishwithwings]

RIA was up ~40% net of fees.  80% in stocks and the remainder was in cash throughout the year.