[Poll & Discussion] CofB&F members' returns for 2024 [Pre tax, and after fees, commisions etc.]

[backtothebeach]

11 hours ago, benchmark said:

does this mean that you sell out the position and then buy equal amount deep in the money put? is this in a tax-free account?

Example:

You are long 100 shares trading at $90, zero cash. You sell the shares and sell a 3 month out $110 strike put at $20.50.

You now have zero shares, $11050 in interest bearing cash. You still have exposure to the stock trading up or down, but have limited your upside to $110.50, so it is not an entirely free lunch. Using that cash for withdrawals or buying other stocks with it turns it into leverage.

 

It's the same risk profile as a covered call basically, but different nuances. With interest rates at 4-5% the put is likely to get assigned once the time value is gone, often after a few bad days in the market when the option has gone further in-the-money. The market won't give you the free interest on the cash for long once it seems the put is certain to end up in-the-money.

 

In a tax free acount or jurisdiction there should be no problem, as I understand in the U.S. it is a grey area* if selling a stock at a loss and then selling an ITM put can be interpreted as a wash sale, depending on how deep ITM, how likely to be assigned.

 

*not tax advice.

[John Hjorth]

19%.

[backtothebeach]

1 hour ago, Kizion said:

How do you take leverage into account in your returns? I also have used quite some margin at the beginning of this year, and I'm wondering how to consider it for my annual return calculation. At the moment, I'm including my leverage to calculate my returns, in other words, I consider my leverage as my own money for my return calculation.

Same, I just look at account value, calculating unlevered return would be very difficult.

[SharperDingaan]

6 hours ago, Red Lion said:

Are the houses investments and are you counting those as part of your portfolio return? 

 

Just curious because I've also been putting a lot of capital into real estate with an acquisition binge in 2023 and a lot of capital improvements in 2024. 

 

I'd have a meaningfully larger net worth right now if I'd just stayed in my stock ideas since 2023 and 2024 have been great years in the markets, but I feel like it could have gone the other way as well. I'm pretty comfortable with my large allocation to direct real estate investment right now. I've got about 85% of my net worth at cost invested in private investment real estate, 25% in a closely held business, and 20% investment accounts stocks/tbills. The 30% is all mortgage debt against some of the investment real estate. 

 

If we were to see a scenario where mortgage rates decline and I see a lot of opportunities in the public markets (or real estate market) I think I'd still be in a position to take a fair amount of additional leverage to load up on investments, and also refinance my mortgages. Unlike many with real estate investments, I only have some higher rate mortgages taken out recently which can be refinanced accretively (or even paid off)

 

We treat it as money taken off the investment table as the intent, management, and location (London) is entirely different. For now they are just rentals; at some later point they will be sold off and we will be doing more in the housing development business, where we also have local and deep expertise in the quantity surveying area.

 

Primarily a risk management vs investment thing, so that if we blow up on the investing side, we're still walking away with a healthy nest egg. If it works out; over time the investment side becomes purely passive income generation, and the growth is all in the property business. 

 

BTC gets into the upper portion of the adoption 'S' curve; we take our millions and pump it into some diversifying real estate elsewhere than the UK  

 

SD

 

 

 

 

 

Edited Thursday at 02:27 PM by SharperDingaan

[Saluki]

I have two accounts I trade in. My main account and another one I opened because my main broker sux and won't let me trade some small caps at all, and even larger illiquid names like Nintendo or Fairfax, it makes me do 2 factor authentication and limit orders.  Also since SIPC has limits per account, I felt like I should have more than one broker just in case.  I also gave about 10% of my money to a friend who manages money and I haven't checked how it's doing. 

 

The smaller one is about 6% of my portfolio and is up 77.73%.  The majority is just two stocks, one of which is up (Kraken) and one is down (JOE). My main account is +16.49% this year vs 25.02% for the index, but 41.17% over 3 years vs 29.29% for the SP500, so I'm okay with the results.

 

JOE is my 3rd largest position and that is part of the reason for the results, but a lot of the rest is due to unforced errors.  STNG had a great run from $40-$80 and I trimmed, but didn't sell the whole thing because I wanted to wait till 2025 to avoid taxes, and it's now in the $40s again.  I moved some of the sale proceeds into other shipping stocks, which are also down, but not as much.  I sold VTS and SWBI correctly for a nice profit, but there is no good reason for thumb sucking on STNG or some other ones I held too long. I was slow to sell some losers like ENPH when the story changed, and was a little lazy and just bought some "okayish" names when I didn't have better ideas, when I should've just waited in cash instead. I was distracted by other things like my partner's health issues so while I didn't exactly phone it in, I didn't follow the same due diligence and deep dive on newer positions that I do for larger holdings and there were mistakes made because of it.  Small position sizing because of my risk aversion paid off on the losers though.  Lessons learned will help me going forward, as always.

 

Since it's the first trading day of the new year, I'll be looking carefully at my holdings and trimming to get my margin down to zero over time and just holding cash if I don't see anything great. Taxes are zero in 2025 so far, so selling winners or losers should be based on the fundamentals now, not my tax bill 15 months from now. 

[thepupil]

Overall made about 15%.

 

Since tracking a consolidated number (2017) of all accounts, I've made +14.9%/yr while the S&P 500 has made 14.7% / year with greater tax efficiency and lower effort for SPY. 

 

Since May 2013, my consolidated IBKR accounts which are the bulk of my investments have made 14.4%/yr on a time weighted basis and 15.7% IRR, vs 13.5% for the S&P 500 (again with better tax efficiency and no effort favoring the index

 

Since August 2016, my fidelity accounts have made 11.3%/yr on a time weighted basis vs the market's 14.4%. for the time frame that this account underperformed it was small so money weighted would be a lot better but don't have that data. 

 

Regarding 2024, I'd repeat 2023 and say that I deserved to underperform this year. I haven't owned the market's best performing businesses (fundamentally) and haven't found high conviction in a lot of stuff. Have been running overly diversified and low-ish risk and shouldn't expect to keep up in a year like last. I expect to continue to underperform should the environment remain similar. 

 

I'm 12 or so years into this and it's unclear that I've added any value, but on an absolute basis, I'm satisfied. I've done a little better than the index owning very little tech, but no points for difficulty. 

 

my investment accounts are about 50% of my net worth, with 32% or so being in a trust which i don't control but receive distributions (primarily invested in indices), and the remainder in home equity. 

 

2024: +15%

2023: +18%

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

 

On 1/2/2024 at 9:36 AM, thepupil said:

More comprehensive writeup: 

 

So this was a year in which I had little conviction, decreased equity exposure significantly as bonds became more relatively attractive IMO (got as low as 70% long stocks, 30%-40% long bonds) and was generally not inclined to to aggressively average down or hold things on their way up. This means I impaired some capital in things like JBGS (swapped for ELME at the bottom, ELME rebounded less), aggressively took profits in JOE (began year at 9%, ended year at 3% despite outperforming holdings), sold a significant amount of Berkshire Hathaway given my belief its largest holding (AAPL) is overvalued and that its absolute / relative value is less clear than in past. I more or less feel the same about my portfolio as i did throughout 2023. I don't have super strong conviction in much of anything and am about 80% long stocks / 20% long bonds. I own a bit too much real estate and am way too invested in the US, but this has been the story of my entire investing journey. 

 

My consolidated IBKR accounts have returned: +319% from May 24th 2013 to December 29th 2023. SPY is about 249%. REITS +81%....Account = 14.5% / yr. SPY = 12.5% / yr. My consolidated Fidelity accounts have returned: +141% from August 12th 2016 to December 29th 2023. SPY is +148%. REITs +38%. Account =12.6%/yr, SPY =13.1%/yr. 

My 401K (not included in the above and a low % of NAV) returned 6.7% as it was mostly invested in the bond index. My wife's 401k (a very small % of NAV) is invested in stock indices. Good year professionally. Substantial savings/growth in NW, remodeled house, paid for expensive ass life. 

 

I've modestly outperformed over time. About half of my accounts is tax deferred which blunts the blow of decreased tax efficiency relative to index. I view my performance as okay. I could paint it as really good ( outperforming despite almost no direct tech, 50% ish on average in RE and destroying RE benchmark). Or I could paint it in a very negative light (higher effort and tax inefficiency relative to indx to no risk adjusted value add). 

 

Overall, since tracking consolidated all account performance (+14.9%/yr vs SPY +13.3%/yr)

2023: +18%

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

Ending Portfolio (I'll get rid of the stupid Norfolk short soon)

 

 

 

 

 

 

 

 

 

Edited Thursday at 05:03 PM by thepupil

[TwoCitiesCapital]

6 hours ago, Milu said:

Another datapoint that could be helpful is how does your portfolio fit as a percentage of total net worth? For example some people could have a business, house or other asset that comprise of the vast majority of their net worth.
 

If person A has a fully paid off house worth $1m, a business worth $2m, and then have a ‘portfolio’ of stocks worth 500k that they trade in on the side I’d look at things slightly differently than person B with a $3.5m stock portfolio and no other assets. A 50% return for person a would be $250k and represent an increase of less than 10% on their starting net worth, whereas for person B it’s an increase of $1.75m. Person A could likely take a lot more risk and possibly look like a superstar if it pays off due to the fact that any mistakes would not damage their net worth too much, whereas person B could blow up after a few bad years.

 

My investments are ~85% of my total net worth with only my home equity as a meaningful contributor outside of my portfolios. 

[Milu]

12 minutes ago, TwoCitiesCapital said:

 

My investments are ~85% of my total net worth with only my home equity as a meaningful contributor outside of my portfolios. 

That's a good amount of skin in the game so for you. I'm along same lines, essentially about 99% of my net worth is my portfolio, only thing outside is a checking account that I pay my day to day expenses out of and keep some extra funds in for holidays or other one time purchases.

 

I've come across a number of investors over the years who've gone into big details about how they run a focused portfolio of 3 stocks, following Mungers advice, and are crushing the market each year. Then you realise most of their assets are in real estate and bonds, and the portfolio they are managing is really just a fun money account comprising of about 5% of their net worth!

[brobro777]

2 hours ago, thepupil said:

Overall made about 15%.

 

Since tracking a consolidated number (2017) of all accounts, I've made +14.9%/yr while the S&P 500 has made 14.7% / year with greater tax efficiency and lower effort for SPY. 

 

Since May 2013, my consolidated IBKR accounts which are the bulk of my investments have made 14.4%/yr on a time weighted basis and 15.7% IRR, vs 13.5% for the S&P 500 (again with better tax efficiency and no effort favoring the index

 

Since August 2016, my fidelity accounts have made 11.3%/yr on a time weighted basis vs the market's 14.4%. for the time frame that this account underperformed it was small so money weighted would be a lot better but don't have that data. 

 

Regarding 2024, I'd repeat 2023 and say that I deserved to underperform this year. I haven't owned the market's best performing businesses (fundamentally) and haven't found high conviction in a lot of stuff. Have been running overly diversified and low-ish risk and shouldn't expect to keep up in a year like last. I expect to continue to underperform should the environment remain similar. 

 

I'm 12 or so years into this and it's unclear that I've added any value, but on an absolute basis, I'm satisfied. I've done a little better than the index owning very little tech, but no points for difficulty. 

 

2024: +15%

2023: +18%

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

 

 

Probably just bad timing man, you sound one of them guys who outperform SPX by a good margin in time periods like 1999-2011

 

[thepupil]

1 hour ago, brobro777 said:

 

Probably just bad timing man, you sound one of them guys who outperform SPX by a good margin in time periods like 1999-2011

 

ha yes, when value guys had it easy! 

[Saluki]

23 minutes ago, thepupil said:

ha yes, when value guys had it easy! 

 

4 hours ago, thepupil said:

Overall made about 15%.

 

Since tracking a consolidated number (2017) of all accounts, I've made +14.9%/yr while the S&P 500 has made 14.7% / year with greater tax efficiency and lower effort for SPY. 

 

Since May 2013, my consolidated IBKR accounts which are the bulk of my investments have made 14.4%/yr on a time weighted basis and 15.7% IRR, vs 13.5% for the S&P 500 (again with better tax efficiency and no effort favoring the index

 

Since August 2016, my fidelity accounts have made 11.3%/yr on a time weighted basis vs the market's 14.4%. for the time frame that this account underperformed it was small so money weighted would be a lot better but don't have that data. 

 

Regarding 2024, I'd repeat 2023 and say that I deserved to underperform this year. I haven't owned the market's best performing businesses (fundamentally) and haven't found high conviction in a lot of stuff. Have been running overly diversified and low-ish risk and shouldn't expect to keep up in a year like last. I expect to continue to underperform should the environment remain similar. 

 

I'm 12 or so years into this and it's unclear that I've added any value, but on an absolute basis, I'm satisfied. I've done a little better than the index owning very little tech, but no points for difficulty. 

 

my investment accounts are about 50% of my net worth, with 32% or so being in a trust which i don't control but receive distributions (primarily invested in indices), and the remainder in home equity. 

 

2024: +15%

2023: +18%

2022: +4.5%

2021: +55%

2020:  +2%

2019: +20%

2018: -2%

2017:  +15%

 

 

 

My very long term performance is probably nothing to write home about since I took a pounding in 2008 and was overly conservative for a while after that. But if your recent performance is much better and you are making more in salary (and therefore have more to add to your AUM every year than you did in your 20s, then it's all been worth it because the early years were tuition. 

 

I contributed way more to my taxable accounts last year than I did when I was making $75k salary and had $60k in student loans.  So if my later performance is better than my early stuff, I'll take it. 

 

But I think it's also important to think about asset classes.  If you are only stock picking, then the SP500 is a good default measuring stick.  But things like bonds and real estate offer things that equities don't, so why compare them at all?  

 

With R/E, you get an inflation hedge and non-callable leverage, as well as optionality to refinance a mortgage without penalty.  But you also have transaction costs.  So it's apples and oranges vs the returns/volatility/liquidity of an index.

 

 

[Eng12345]

On 1/1/2025 at 12:55 PM, TwoCitiesCapital said:

 

I have a spreadsheet. I take down the values of ALL of my portfolios every time there is a cash-flow (withdrawal/deposit) and then adjust for the cash flow and determine the return over that period. 

 

On 12/31, I can simply link all of the returns via multiplication to determine the compounded return for the year . This would be a Time Weighted Return calculation. Typically, its only appropriate when you DON'T control the timing of the cash flows. I use it as the majority of the cash flows into my portfolio in any given year tend to be bi-weekly contributions to my 401k and HSAs which I have limited control over the timing. 

 

I may change to a money weighted return for 2025 as I'm vastly de-emphasizing my 401k/HSAs contributions for the next year or two to focus on building a base of taxable/accessible savings and WILL control the timing of the cash flows more. 

I think I've attempted to touch on this before but want to make sure my understanding is correct. 

 

Say I have two brokerage accounts Etrade and Fidelity with multiple cashflows over a year. 

Etrade publishes a 20% TWR for the year

Fidelity publishes a 10% TWR for the year 

 

I'm assuming I cannot combine these returns as they are both geometric means.

However, thinking about it I can't verbalize why you couldn't assuming the two TWRs are over the same period, and you weighted them accordingly for size of account. But I'm not confident that would be a correct approach. Gut is telling me no. 

 

The problem I'm trying to solve is attempting to incorporate my inactively managed funds (current company 401k) into my return calculations. This year I was able to calculate a 26% TWR because I didn't have a lot of cash flows on my active investments and recorded balances appropriately but I'm not able to incorporate the inactively managed funds. 

 

edit: The document @John Hjorth posted a few pages ago is actually more helpful. It seems XIRR is the best method really. Thanks for the eye-opening conversation on all this. I never really thought about quantifying returns being so open to discussion. Thought it was a bit more black and white, but realizing now it has some grey area to it.

Edited Thursday at 07:29 PM by Eng12345

[Paarslaars]

6 minutes ago, Saluki said:

 

 

My very long term performance is probably nothing to write home about since I took a pounding in 2008 and was overly conservative for a while after that. But if your recent performance is much better and you are making more in salary (and therefore have more to add to your AUM every year than you did in your 20s, then it's all been worth it because the early years were tuition. 

 

True words, I started out in 2013 with 10k and keep my track record to remind myself of my mistakes back then.

But in terms of absolute money, only '23 and '24 are really relevent because I added a lot from real estate early '23.

My gains this year are larger than my portfolio was pre '23 

Edited Thursday at 07:16 PM by Paarslaars

[brobro777]

1 hour ago, thepupil said:

ha yes, when value guys had it easy! 

 

Maybe that kinda time is coming soon or we're in it already haha

 

 

[John Hjorth]

29 minutes ago, Eng12345 said:

edit: The document @John Hjorth posted a few pages ago is actually more helpful. It seems XIRR is the best method really. Thanks for the eye-opening conversation on all this. I never really thought about quantifying returns being so open to discussion. Thought it was a bit more black and white, but realizing now it has some grey area to it.

 

@Eng12345,

 

I'm happy here to contribute to moving your view and perception of the world, the reality and the truth, - and the 'absoluteness' of them all three.

 

Rest assured, you're not the only one, nor were you in the past.

 

- - - o 0 o - - -

 

It must have been at the end of 2016 or 2017, I think, and I read here on CofB&F what I today would call a 'crash course' on 'Time Weighted Return', presented by @SharperDingaan here on CofB&F.

 

In a way, my world view and absolute perception of things 'collapsed' / ''crashed' by reading that post here on CofB&F, before that, nobody would be able to tell me anything about measuring returns! - 'Naturally', I 'knew already what was to know' about that matter! - Not!

 

Why was I not taught TWR in Finance classes as a concept back then by my professor? [That would be - likely '79 or '80 - I don't exacly remember anymore].

 

- - - o 0 o - - -

 

Last year, in November, I got an invite to the 50 years anniversary celebration of my alma mater, despite personal sad condition, decided to go along with the Lady of House [It's also her Alma Mater].

 

Met then among a lot of other interesting persons my former professor teaching me finance. It turned out, he had spend - after I left - some years in education and research, and then left those fields, to join university management! - and did retire from that, not so long ago.

 

Under our conversation, he asked me : 'John, what are you doing nowadays?' [Please remember here, I was a student under him]. Normally, when people ask me this question, the answer is by now: 'Nothing'. Here, my answer was : 'I'm full time engaged in showing that Eugene Fama is wrong!'  

 

He was absolutely baffled by my answer, and did not get his act together to ask supplementary questions.

 

I suspect he stlll doesn't understand my answer. 

 

- - - o 0 o - - -

 

Juts thinking about this episode can still cause me to crack up! 

[TwoCitiesCapital]

2 hours ago, Eng12345 said:

I think I've attempted to touch on this before but want to make sure my understanding is correct. 

 

Say I have two brokerage accounts Etrade and Fidelity with multiple cashflows over a year. 

Etrade publishes a 20% TWR for the year

Fidelity publishes a 10% TWR for the year 

 

I'm assuming I cannot combine these returns as they are both geometric means.

However, thinking about it I can't verbalize why you couldn't assuming the two TWRs are over the same period, and you weighted them accordingly for size of account. But I'm not confident that would be a correct approach. Gut is telling me no. 

 

The problem I'm trying to solve is attempting to incorporate my inactively managed funds (current company 401k) into my return calculations. This year I was able to calculate a 26% TWR because I didn't have a lot of cash flows on my active investments and recorded balances appropriately but I'm not able to incorporate the inactively managed funds. 

 

edit: The document @John Hjorth posted a few pages ago is actually more helpful. It seems XIRR is the best method really. Thanks for the eye-opening conversation on all this. I never really thought about quantifying returns being so open to discussion. Thought it was a bit more black and white, but realizing now it has some grey area to it.

 

It won't be exactly correct - because you're only adjusting each individual portfolio for the cash flow as opposed to the consolidated portfolio - but you can probably just do a weighted average of the two to get in the ballpark for reporting purposes of an online forum. 

 

Wouldn't pass an audit, but it's not like you're reporting this too clients either. 

[Dinar]

10 hours ago, backtothebeach said:

Example:

You are long 100 shares trading at $90, zero cash. You sell the shares and sell a 3 month out $110 strike put at $20.50.

You now have zero shares, $11050 in interest bearing cash. You still have exposure to the stock trading up or down, but have limited your upside to $110.50, so it is not an entirely free lunch. Using that cash for withdrawals or buying other stocks with it turns it into leverage.

 

It's the same risk profile as a covered call basically, but different nuances. With interest rates at 4-5% the put is likely to get assigned once the time value is gone, often after a few bad days in the market when the option has gone further in-the-money. The market won't give you the free interest on the cash for long once it seems the put is certain to end up in-the-money.

 

In a tax free acount or jurisdiction there should be no problem, as I understand in the U.S. it is a grey area* if selling a stock at a loss and then selling an ITM put can be interpreted as a wash sale, depending on how deep ITM, how likely to be assigned.

 

*not tax advice.

I am neither a tax accountant nor a tax lawyer, but in the US you are asking for trouble with this strategy.  It is not a grey area according my accountant - it is a wash sale. 

[backtothebeach]

27 minutes ago, Dinar said:

I am neither a tax accountant nor a tax lawyer, but in the US you are asking for trouble with this strategy.  It is not a grey area according my accountant - it is a wash sale. 

Yeah, sorry, shouldn’t have mentioned this. Best to do this stuff in non taxable accounts or jurisdictions.

[villainx]

I'm at where the SP500 was at for 2024.  So average?

[TwoCitiesCapital]

5 hours ago, Dinar said:

I am neither a tax accountant nor a tax lawyer, but in the US you are asking for trouble with this strategy.  It is not a grey area according my accountant - it is a wash sale. 

 

+1 the rule is "substantially similar securities"

 

In in the money calls and in the money puts are substantially similar to the underlying stock and would be a wash sale. The actual gray area is OTM options. If the stock is trading at 90 - is a $95 strike call substantially similar? Is an $85 put? Both have dramatically different economics, different betas, and different risks (like expiring worthless if the stock doesn't move, or moves the opposite direction).

 

But it's probably best to not get cute with it and just roll to competitor if you're that concerned about 1-month of beta exposure. 

Edited Friday at 04:45 AM by TwoCitiesCapital

[Eng12345]

On 1/2/2025 at 3:12 PM, John Hjorth said:

 

@Eng12345,

 

I'm happy here to contribute to moving your view and perception of the world, the reality and the truth, - and the 'absoluteness' of them all three.

 

Rest assured, you're not the only one, nor were you in the past.

 

- - - o 0 o - - -

 

It must have been at the end of 2016 or 2017, I think, and I read here on CofB&F what I today would call a 'crash course' on 'Time Weighted Return', presented by @SharperDingaan here on CofB&F.

 

In a way, my world view and absolute perception of things 'collapsed' / ''crashed' by reading that post here on CofB&F, before that, nobody would be able to tell me anything about measuring returns! - 'Naturally', I 'knew already what was to know' about that matter! - Not!

 

Why was I not taught TWR in Finance classes as a concept back then by my professor? [That would be - likely '79 or '80 - I don't exacly remember anymore].

 

- - - o 0 o - - -

 

Last year, in November, I got an invite to the 50 years anniversary celebration of my alma mater, despite personal sad condition, decided to go along with the Lady of House [It's also her Alma Mater].

 

Met then among a lot of other interesting persons my former professor teaching me finance. It turned out, he had spend - after I left - some years in education and research, and then left those fields, to join university management! - and did retire from that, not so long ago.

 

Under our conversation, he asked me : 'John, what are you doing nowadays?' [Please remember here, I was a student under him]. Normally, when people ask me this question, the answer is by now: 'Nothing'. Here, my answer was : 'I'm full time engaged in showing that Eugene Fama is wrong!'  

 

He was absolutely baffled by my answer, and did not get his act together to ask supplementary questions.

 

I suspect he stlll doesn't understand my answer. 

 

- - - o 0 o - - -

 

Juts thinking about this episode can still cause me to crack up! 

Hahaha thanks John I should have known better than to assume anything was black and white. 

 

Nothing in life is. 

[Red Lion]

On 1/2/2025 at 2:27 AM, Milu said:

Another datapoint that could be helpful is how does your portfolio fit as a percentage of total net worth? For example some people could have a business, house or other asset that comprise of the vast majority of their net worth.
 

If person A has a fully paid off house worth $1m, a business worth $2m, and then have a ‘portfolio’ of stocks worth 500k that they trade in on the side I’d look at things slightly differently than person B with a $3.5m stock portfolio and no other assets. A 50% return for person a would be $250k and represent an increase of less than 10% on their starting net worth, whereas for person B it’s an increase of $1.75m. Person A could likely take a lot more risk and possibly look like a superstar if it pays off due to the fact that any mistakes would not damage their net worth too much, whereas person B could blow up after a few bad years.

You pretty much summed me up in this tip of the iceberg stock scenario. But what you’re discounting is the ability for the private business worth $2 million to outperform the stocks. A private business is an equity investment, and should be held with the intent to outperform a public equity portfolio. 
 

I’ve been fortunate to have massively outperformed with some private business investments that are pushing 100 baggers over 10 years. There are no longer amazing opportunities for reinvestment so I’ve been investing into stocks and privately held real estate investments.
 

I’d far rather keep 100% in private business interests and fully leverage my personal residence if I still had a runway on 20-30% ROIC for all of my capital, and would like to leverage that to see even higher ROE. Stocks are an opportunity to maybe compound at 12-15% over the long term after tax if you’re really fantastic at what you do. 

[Onefoothurdles]

Up ~255% this year as a significant portion of my PA was in an Indian company called Websolar Energy System which ~10xed through 2024. 

[SharperDingaan]

On 1/2/2025 at 5:27 AM, Milu said:

Another datapoint that could be helpful is how does your portfolio fit as a percentage of total net worth? For example some people could have a business, house or other asset that comprise of the vast majority of their net worth.
 

If person A has a fully paid off house worth $1m, a business worth $2m, and then have a ‘portfolio’ of stocks worth 500k that they trade in on the side I’d look at things slightly differently than person B with a $3.5m stock portfolio and no other assets. A 50% return for person a would be $250k and represent an increase of less than 10% on their starting net worth, whereas for person B it’s an increase of $1.75m. Person A could likely take a lot more risk and possibly look like a superstar if it pays off due to the fact that any mistakes would not damage their net worth too much, whereas person B could blow up after a few bad years.

 

Just to add to this ...

 

Reported results are not comparable as the portfolio's are not the same; some aren't using TWR, some portfolios are leveraged while others are not, some portfolios are all equity versus others which are a mix of equity/bonds/cash, other portfolios are just one component in a much larger total, .... an endless list. The value add is getting a hint as to what is possible, and being able to assess whether you're doing better than you were as a result of COBF.

 

Those from the 'business' side will generally have a lower risk portfolio, as a way by which to offset risk arising from business ownership. The major assets may be anything from a mortgaged building that the business is renting (tax-deductible rent ultimately paying off the mortgage), through to T-Bill/Bond holdings; generally, the less 'corporate finance' the business person is, the more real estate in that lower risk portfolio. Risk managed according to what that portfolio is intended to to.

 

Private partnerships can be very rewarding, but they also carry unique risks as there is always the risk of a partners sudden exit (planned or otherwise), and high partner taxes if the year's partnership earnings are simply paid out. As 40% liquidity discounts are not uncommon, high cash yields are periodically available ... if resources are available. Hence, to minimise partner taxes, many a partnership prefers to use ongoing 'excess' earnings to simply buy back some of its equity as a 'return of capital'. 

 

So what? Most business people need to keep 'active' in early retirement, and partnerships are a preferred way of both spreading the financial and operational risk, as well as reducing an owners 'time on site'; so, expect to see a lot more of this. Obviously, it's not for everyone, but the possibilities are endless; craft brewing just being one of many  

 

SD

 

 

 

[Gregmal]

Overall it’s a huge waste of energy getting too much into the minutiae with respect to “yearly returns”. Who decides that Dec 31/Jan 1 is such an important date? It’s not and most worthwhile investments take longer to play out. Each persons returns in the overall context are part of a different story, and it might not seem like apples to apples if we don’t know everyone’s exact method of calculations. But the truth is that even if we all used the same metrics they are apples to oranges.