How I Grow My Investment Portfolio At 18% CAGR Over 17 Years???
Solid 18% CAGR over 17 years from Jan 2000 to Sep 2016 How? Scroll down! :-) By doing monthly capital injection into his investment portfolio! Hurray! 18% CAGR! You think this is an investment joke?
That's how we can dilute out our losses and survive our investment mistakes ;)
What can't kill us will make us stronger!
That's why I had a field day poking fun at those who conveniently "forget" about cash injections when calculating their XIRRs.
I don't think its a deliberate attempt to "cheat'. I suspect unconsciously, some cannot accept the obvious fact most of their portfolio growth come from "earn more and save more"; not their "investing prowess" ;)
LOL! IRR is supposed to take care of this financial sleight of hand ... to show the actual gains not due to cash / capital injections.
So if someone starts with $10K and grows it to $16,300 ten years later; but also puts in $1M Toto jackpot at the end of the 8th year and grows that to $1,102,500.
Then at the end of the 10th year, with total portfolio of $1,118,800 the IRR is still 5%.
------------------------------------------------------------------------------------- How about people like us with no regular good / high income to cover the blemishes? :)
Long term holding of dividend paying assets? Yield hogs? What if price gets cut in half? Never mind got panadols! :)
Harvesting of assets whenever overbought or irrational exuberance? The trick is to know when is overbought ... and how much to harvest? ;)
Have a large warchest & practice being a very patient monk? Hohoho...
CW,
ReplyDeleteLOL!
Ain't it the truth!
That's how we can dilute out our losses and survive our investment mistakes ;)
What can't kill us will make us stronger!
That's why I had a field day poking fun at those who conveniently "forget" about cash injections when calculating their XIRRs.
I don't think its a deliberate attempt to "cheat'. I suspect unconsciously, some cannot accept the obvious fact most of their portfolio growth come from "earn more and save more"; not their "investing prowess" ;)
Shh...
:-) Not sure how many will get the message!
DeleteLOL! IRR is supposed to take care of this financial sleight of hand ... to show the actual gains not due to cash / capital injections.
ReplyDeleteSo if someone starts with $10K and grows it to $16,300 ten years later; but also puts in $1M Toto jackpot at the end of the 8th year and grows that to $1,102,500.
Then at the end of the 10th year, with total portfolio of $1,118,800 the IRR is still 5%.
-------------------------------------------------------------------------------------
How about people like us with no regular good / high income to cover the blemishes? :)
Long term holding of dividend paying assets? Yield hogs? What if price gets cut in half? Never mind got panadols! :)
Harvesting of assets whenever overbought or irrational exuberance? The trick is to know when is overbought ... and how much to harvest? ;)
Have a large warchest & practice being a very patient monk? Hohoho...
Hi Uncle8888,
ReplyDeleteFor those who may not realise, your chart's summation of total earned income is actually IRR or XIRR of 0%
Whoa! Don't hit the face ... or any other delicate parts!! LOL!!
If measuring average growth rate of income, then should be final year earned income / 1st year earned income. :)