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omg, both XIRR and NAV are not perfect, why not just use both for comparison?
(03-01-2013, 08:46 AM)specuvestor Wrote: [ -> ]I wasn't referring to excel functions. I was referring to the pitfall in the CONCEPT of IRR.
IRR assumes that your returns are compounded within and ANNUALISED, which may not be true especially when you have windfall, which is what you are saying below. That is why investment industry we always look at beginning NAV vs ending NAV and use the derived % return. Nonetheless for a lengthened period of time, for eg Buffett or 10 years track, IRR is pretty reliable because any single year windfall would have been smoothened out
Conversely it is similar reason why arithmetic mean is used for bills calculation vs geometric YTM for notes and bonds. We have to understand the impact.
(01-01-2013, 01:41 PM)corydorus Wrote: [ -> ]Is not the volatility. Scenario one performs better because you made 100% in a day and pull the money out right after.
Thus XIRR is just trying to annualized to a year with that kind of margins. Thus is way better than Scenario two as your money is held up for the year.
Some pp may for ego reason may invest just $1, make ten times in a day and quit. In quality wise you achieved but very very small absolute.
Therefore need to try to invest as much as possible. And when you do this, to achieve daily 100% multiple for full year is impossible.
Cory
XIRR is much easily to calculate as part-time investor, compare with NAV. XIRR should has a high correlation with NAV, both should show similar result over a year, which is what we did now.
XIRR also useful for calculation of multi-years return, which you have already highlighted.
The annualized issue can be solved by XIRR with year-end date as last entry, which has been discussed before in other thread.
Refer to Table A for performance of Reits and Table B for performance of Property Stocks in 2012.
http://www.remisiers.org/cms_images/rese...-daily.pdf
Reits:
Best Performer: Frasers Commercial Trust (+78.4)
Worst Performer : K-Green Trust (+13.8%)
Property Stocks:
Best Performer : Wing Tai (+97.4%)
Worst Performer : St****** (+ 2.7%)
The story of how much you make or loss investing in stocks is not measured by year by year only. i think most important measurement is the first day you invested until now, how much you make or loss. What is your total assets and FCF UTD? Have they increased or decreased? i found in my first year in "de-accumulation" phase seems to be about minus $15,000 to 20,000; quick estimation only. That is we have more time to spend then when we were accumulating. Of course, it's does not mean i stop investing. Only now it seems harder without some capital replenishment from work.
(03-01-2013, 06:26 PM)Temperament Wrote: [ -> ]The story of how much you make or loss investing in stocks is not measured by year by year only. i think most important measurement is the first day you invested until now, how much you make or loss. What is your total assets and FCF UTD? Have they increased or decreased? i found in my first year in "de-accumulation" phase seems to be about minus $15,000 to 20,000; quick estimation only. That is we have more time to spend then when we were accumulating. Of course, it's does not mean i stop investing. Only now it seems harder without some capital replenishment from work.
Yes. This is the best approach and is how i am tracking on daily basis using spreadsheets. I started tracking since about May 2011. So looking at STI was at 3168 to now 3224. So STI grew about 1.7%. Dow grew by 7.2% same period. My net worth (property, equities, cash, bonds, etc) increased by 8+ to 9% in the same 1.5+ year period. So on this basis, i am quite happy and i think it means my more active portfolio allocation methods seems to work. See how it works in the years ahead..... Fingers crossed.
since XIRR seems to only capture performance of money in the market (i.e. while holding the stocks), and not out of it, is it right to conclude that it almost always will show a slightly (or significantly at times) higher/worse returns vs NAV method? This is because the cash drag can be quite significant, depending on investment style.
Wee, not true in the sense the tool cannot prevent you from pulling the cash in or out. If you like cash to drag u like a "fixed" fund, u can choose to have it inside after stock sale.
Cory
(03-01-2013, 07:32 PM)corydorus Wrote: [ -> ]Wee, not true in the sense the tool cannot prevent you from pulling the cash in or out. If you like cash to drag u like a "fixed" fund, u can choose to have it inside after stock sale.
Cory
Ok thanks, now I understand.
(03-01-2013, 06:12 PM)Boon Wrote: [ -> ]Refer to Table A for performance of Reits and Table B for performance of Property Stocks in 2012.
http://www.remisiers.org/cms_images/rese...-daily.pdf
Reits:
Best Performer: Frasers Commercial Trust (+78.4)
Worst Performer : K-Green Trust (+13.8%)
Property Stocks:
Best Performer : Wing Tai (+97.4%)
Worst Performer : St****** (+ 2.7%)
I had avoided property stocks and Reits in 2012, especially those property developers. It seems it is not a right choice on hindsight
(03-01-2013, 09:47 AM)CityFarmer Wrote: [ -> ] (03-01-2013, 08:46 AM)specuvestor Wrote: [ -> ]I wasn't referring to excel functions. I was referring to the pitfall in the CONCEPT of IRR.
IRR assumes that your returns are compounded within and ANNUALISED, which may not be true especially when you have windfall, which is what you are saying below. That is why investment industry we always look at beginning NAV vs ending NAV and use the derived % return. Nonetheless for a lengthened period of time, for eg Buffett or 10 years track, IRR is pretty reliable because any single year windfall would have been smoothened out
Conversely it is similar reason why arithmetic mean is used for bills calculation vs geometric YTM for notes and bonds. We have to understand the impact.
(01-01-2013, 01:41 PM)corydorus Wrote: [ -> ]Is not the volatility. Scenario one performs better because you made 100% in a day and pull the money out right after.
Thus XIRR is just trying to annualized to a year with that kind of margins. Thus is way better than Scenario two as your money is held up for the year.
Some pp may for ego reason may invest just $1, make ten times in a day and quit. In quality wise you achieved but very very small absolute.
Therefore need to try to invest as much as possible. And when you do this, to achieve daily 100% multiple for full year is impossible.
Cory
XIRR is much easily to calculate as part-time investor, compare with NAV. XIRR should has a high correlation with NAV, both should show similar result over a year, which is what we did now.
XIRR also useful for calculation of multi-years return, which you have already highlighted.
The annualized issue can be solved by XIRR with year-end date as last entry, which has been discussed before in other thread.
I'm not trying to be funny here but like I explained and Freedom has demonstrated (with an exaggerated example no less), IRR has well known inherent pitfall if you use short periods. Freedom is not delusional
One year is considered short.
http://finaticsonline.com/blog/2010/11/n...r_vs_mirr/
http://www.efinancemanagement.com/invest...return-irr
http://www.google.com.sg/url?sa=t&rct=j&...5884,d.dGI
I'm not saying that the figures that are posted in this thread are wrong, but that we have to be aware. I'm just trying to contribute some facts to the discussion between cory and freedom, if it is distasteful i apologise.
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