Yup, its a lot easier to manipulate with percentages ;)
That's why competent fundamental investors prefer to Trust but Verify using the Cash Flow statements, as its a lot harder to "manipulate" than the Profit & Loss or Balance Sheet statements.
Oh the flip side, if your returns in percentage is not sexy, focus the headlines using actual numbers like:
1) Total Net Portfolio Value crossed $400 billion for the first time! Limpeh "big stick" or what?
2) We made $22 billion last year! Or-yi-or!
Of course somewhere obscure in the middle of the article then you reveal (most people don't read beyond the headlines anyway), you reveal you made 5.81% last year. And the year before? 24.5%...
Got cleavage reveal cleavage; got thighs show thighs ;)
I prefer XIRR as the common denominator for comparison as it already incorporates cashflows. Supposedly anyway. ***
Using ROC can be as misleading as saying "My portfolio grew from $100 to $1M". but it's the great-grandfather who started it with $100 a hundred years ago.
Or "My portfolio hit $1M within 1 year", but it's a million dollar salaryman who puts in $100K each month.
*** The only problem is some don't really know how to come up with XIRR, and mix it up with CAGR, ROC, time-weighted returns, simple interest etc. And then you have garbage in garbage out numbers lol.
For retail investors who are highly dependent on their investments, if the returns in absolute money terms is not enough to grow wealth or at least cover expenses with a wide margin, then high percentage returns is irrelevant. Returns measured in percentage alone is not practical.
In a bear market when there is no returns to speak of, there should be enough cash and liquid assets to cover the period when markets are depressed.
LOL!
ReplyDeleteYup, its a lot easier to manipulate with percentages ;)
That's why competent fundamental investors prefer to Trust but Verify using the Cash Flow statements, as its a lot harder to "manipulate" than the Profit & Loss or Balance Sheet statements.
Oh the flip side, if your returns in percentage is not sexy, focus the headlines using actual numbers like:
1) Total Net Portfolio Value crossed $400 billion for the first time! Limpeh "big stick" or what?
2) We made $22 billion last year! Or-yi-or!
Of course somewhere obscure in the middle of the article then you reveal (most people don't read beyond the headlines anyway), you reveal you made 5.81% last year. And the year before? 24.5%...
Got cleavage reveal cleavage; got thighs show thighs ;)
Your wise words - Trust but verify. LOL! Most of us are too lazy to verify.
DeleteUncle8888,
ReplyDeleteI prefer XIRR as the common denominator for comparison as it already incorporates cashflows. Supposedly anyway. ***
Using ROC can be as misleading as saying "My portfolio grew from $100 to $1M". but it's the great-grandfather who started it with $100 a hundred years ago.
Or "My portfolio hit $1M within 1 year", but it's a million dollar salaryman who puts in $100K each month.
*** The only problem is some don't really know how to come up with XIRR, and mix it up with CAGR, ROC, time-weighted returns, simple interest etc. And then you have garbage in garbage out numbers lol.
For retail investors who are highly dependent on their investments, if the returns in absolute money terms is not enough to grow wealth or at least cover expenses with a wide margin, then high percentage returns is irrelevant. Returns measured in percentage alone is not practical.
ReplyDeleteIn a bear market when there is no returns to speak of, there should be enough cash and liquid assets to cover the period when markets are depressed.