Down goes the Dow

yeah we're not investing with the same goals...My wife is retired already and I need to protect the nest egg rather than grow it a lot. So I have a lot of bonds. As a result I'm up around 15% this year, which is a monster year for my kind of investing but can't compare with a 100% stock portfolio. I try to beat a generic global 60/40 portfolio...didn't do it in 2023, but over the last three years I'm around 250 bps/year ahead of it so I am pleased with that. But the overall returns are not high: 5%/year or so. I guess that's probably negative returns after inflation, so not great.

Hey, that's good.

My belief is that an investor pays for risk protection, and that is worth something, at least in the long run. Insurance policies aren't free, right? And how important it is we won't really know until the books get closed for good. But in the mean time, it is prudent and smart and frankly probably the way it should work for all of us.

Inflation - what the hell can you do about that? Just about anywhere one parks their net worth, inflation would take a bite upon withdrawal, for the most part. There's probably a hedge against inflation, but I am sure it has a ton of downside....

So, in the interest of full disclosure, the return i referred to previously was for brokerage accounts, the bulk of our reserves. Work related 401K/403 b is slightly less and including regular contributions through Sept., came in at 37% (growth mutual funds). Wife's is SNP 500, and we all know that number.

And before I get too excited, in the bigger picture, this just puts us back to where we were at this time 2 years ago, before the big downturn, and within a couple of percent of the ATH.

All of my INVESTMENTS are stocks within mutual funds, and that's all I am counting there. I have about 3.4 YEARS of expenses or so in cash at the moment, but no, I don't consider that at all when considering how my INVESTMENTS did. It should be noted that the cash I have on hand is really NOTHING compared to the money I have invested in stocks. 3+ years of expenses would be a lot for most people as a percentage of all of their value, but I have much more money invested than most people and very low expenses as I have NO debt.

Well...if you did count your cash as part of your portfolio, your performance numbers would be much lower. I mean I wouldn't even think of excluding the bonds in my portfolio even though they serve the same role as your cash ...if I excluded bonds from my performance I'd have much stronger numbers.

You probably should count at least some of your cash because it's part of your overall investment risk management program. You probably wouldn't have so much in stocks if you didn't have all that cash backing you up in case of a long bear market. The good news is that you probably got 5% from your cash which is outstanding.

I made this same argument some weeks ago and got a somewhat convoluted response.

You might even have a 20+ year record of beating the market...

Current portfolio mix:

S&P 500 - 65%

S&P 400- 7%

Russell 2000- 3%

Total Bond market- 25%

Up 18.67% for the year.

I call BS. Not really credible based on how you’ve described your investing approach. If you’d like to defend this claim, share the % breakdown of your portfolio by fund. Otherwise you’re just blowing hot air.

(using an old account as I can’t seem to post using my regular handle as an anonymous poster; former “idiot” and now “comfortably retired” here)

we've learned flagpole only counts the stock portion of his portfolio when reporting performance. In a year the SP500 is up 26% and the NASD is up 55%, 23.72% isn't too hard a bogey. I suspect many of us had that kind of return if we look only at the stock market portion of our returns.

We need to STOP giving any credence whatsoever to this ridiculous fantasy of Flagpole's of having beaten the Dow Jones 32 out of 33 years. I have previously calculated the probability of this it to be about 1/6 billion. Plus, on strong years for the Dow your stock portfolio would have to have some volatile stocks (e.g., tech) which would prove to be its demise on other years. Flagpole DID NOT beat the Dow 32 out of 33 years.

In all likelihood, it is probably the case that most active investors include their regular deposits made each month or pay period into the calculation of their performance as well. To not include them would be a fair amount of work to separate them out.

Their is a quick way to do it - to separate out the periodic contributions made over the year - if anyone was interested, but otherwise I'm not going to the effort to explain it.

I think this is something to keep in mind when comparing one's portfolio performance to an indices simply because the latter does not include infusions of capital along the way.

Most accounts should accommodate that calculation as “time weighted return.

I am a fanatical user of Quicken and depend on it to tell me my returns...if it is wrong or I fat-fingered something, then my personal numbers are wrong.

But otherwise yeah it's very hard to know a personal rate of return, unless all your money is at one institution and they give you the number.

This is a ridiculous conversation to be having. First, Flagpole is comparing his very diversified portfolio against the Dow Jones - which is made up of 30 mostly industrials with only 2 of the "Magnificent 7." Second he refuses to say if he is including dividends in determining his portfolio performance. Over the last 100 years dividends have made up about 34 to 40% of the market's performance. Is he or is he not including dividends?. On the Dow is he taking the capital appreciations of the stocks or also adding in the dividends? Flagpole is, allegedly (his allegation) a big Vanguard fan and one of the biggest Vanguard funds, VTI, had a dividend yield this past year of 1.44% and paid out a dividend of $3.41 per share. How is Flagpole including in his portfolio performance, how is he including that in his calculation of the Dow performance and how is he doing anything when he refuses to say ANYTHING about his calculations. This is beyond silly.

It just hit me ... we got majorly trolled. Nice job, Flagpole! You got us!

Quicken is a great tool. True story - many years ago we used it all the time (don't anymore). We were just starting out and wanted to buy a house but didn't think we could. Without quicken, we wouldn't have bought, but with it, we saw that it was in fact doable as the numbers were projected into the coming months year. Still in the same house today and it turned out to be a very timely purchase.

As for calculations now, our stuff stays put in their respective accounts, so it's not hard to figure. Very little gets shuffled between them and we just need to be aware of periodic contributions in the calculations, which is not a large percentage anyways.

Besides, the Dow is not the best metric by which to compare one's performance. S&P 500 is much more applicable, or for the daring: the S&P 500 and the Nasdaq.

But more to the point, it is not so important for me if my portfolio outperforms an index in any given year, since what happens year to year will fluctuate. What's important is how it compares over a longer duration, like the 3-year, 5-year, 10-year, etc.

The takeaway I get is that FP doesn't sweat the details because his whole approach, which he champions at every opportunity, is to say that a simple buy and hold approach done via stock mutual funds on a regular dollar cost averaging schedule (yes, there is such a thing) is ALL YOU NEED TO DO. Caps added because he emphasizes this greatly.

So, he says that he doesn't sweat it and he doesn't bother to figure those in, and the fact that he believes he has done quite well is all the justification necessary in his eyes.

Edit: my statement is in reference to you noting pertinent factors like dividend reinvestment, etc. are not disclosed in FP's calculations.

Open image

Why did The Magnificent Seven have a great 2023?

To make up for a $hitty 2022.

Drawdowns from ATH;

AAPL, -31.28% from 1/03/22, now up 5.78%

AMZN, -55% from 7/8/21, still down 18.56%

GOOG, -44.60% from 11/18/2021, still down -6.49%

META, -76.74% from 9/7/21, still down -.98%

MSFT, -37.56% from 11/19/21, now up 9.6%

NVDA, -66.36% from 11/29/21, now up 48.38%

TSLA, -73.63% from 11/4/21, still down 39.39%

Anyone play TAG these last 2 years?

TUR; ARGT; GREK

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=7ilhEWFhoUGXalbDzxHWVu

Money on the sidelines?

elmwealth.com

The Chemistry of 10% More Elm Partners

Tara McKeaney

Elm: making sense of your wealth. Take the guesswork out of wealth management with our sensible-yet-sophisticated approach to investing.

Open link

federalreserve.gov

The Fed - F.101 Households and Nonprofit Organizations

The Federal Reserve Board of Governors in Washington DC.

Open link

VTI/BND 60/40 rebalance, end of 2023, allocation drift is 64.21/35.79.

S&P 500 dilution past 2 quarters!

From 6/30/2013 to 6/30/2023; TTM S&P 500 revenue had a 4.45% CAGR. Dividend and Buyback payout as % of revenue went from 7.28% to 9.10%. Dividend and Buyback Yield dropped from 5.02% to 3.73%. Market Cap grew at a 10.14% CAGR. If in 6/30/2033; revenue growth, payout and yield are the same as 6/30/2023, S&P 500 will experience only 4.46% CAGR.