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Old 02-18-2009, 09:32 AM   #21
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This is like trying to define net worth (it depends how you want to define it). If you are adding money to the market as it is dropping and then comparing a past date portfolio balance to a present day portfolio balance would it not be a lower percentage of loss since the "new money" has not gone down as fast?
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Old 02-18-2009, 09:47 AM   #22
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This is like trying to define net worth (it depends how you want to define it). If you are adding money to the market as it is dropping and then comparing a past date portfolio balance to a present day portfolio balance would it not be a lower percentage of loss since the "new money" has not gone down as fast?
That's where the XIRR function comes into play.

My year-end 2008 401K statement shows an XIRR of -28.0% even though in dollar amounts, it dropped 19% from 1/1/2008 to 12/31/2008 because of the added contributions.
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Old 02-18-2009, 10:05 AM   #23
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Don't forget to figure in inflation. The price of my usual baked lasagna entré at our neighborhood red-checkered tablecloth Italian restaurant went up a buck this year.

That is how I measure inflation, by the way.

I've watched it go from $5.95 to now $12.95 over the years for the exact same serving of lasagna. That does include side salad with house Italian dressing and hot garlic bread so ... I'm happy.

Just sayin'.
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Old 02-18-2009, 11:26 AM   #24
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That's where the XIRR function comes into play.

My year-end 2008 401K statement shows an XIRR of -28.0% even though in dollar amounts, it dropped 19% from 1/1/2008 to 12/31/2008 because of the added contributions.
Question Ziggy: So which number is correct, or which would use answer the "how much are you down" question? However, I suspect you would answer it as you have. However, I think many actually think the lower one is the correct answer. I am not trying to be smart either since everyone (well almost everyone) knows I do not invest in the SM (only FDIC CD's over the past 30 years).
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Old 02-18-2009, 11:30 AM   #25
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Question Ziggy: So which number is correct, or which would use answer OP's question? I am not trying to be smart either since everyone (almost) knows I do not invest in the SM (only FDIC CD's).
I think the XIRR (in my case -28.0%) is the more correct number in terms of measuring portfolio performance. If you're talking about how much you're worth on 1/1/2009 relative to 1/1/2008, then the simpler calculation the takes the percentage delta in start and end values (-19.4% for me) would be more appropriate.
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Old 02-18-2009, 11:34 AM   #26
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I am not trying to be smart either since everyone (well almost everyone) knows I do not invest in the SM (only FDIC CD's over the past 30 years).
Yes we do. Please stop rubbing our noses in it.
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Old 02-18-2009, 01:31 PM   #27
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You need to write a 'how to' book. Most people lost that much with a 'balanced' portfolio.
It would be more like a 'how to' paragraph.

Follow a few dozen large, top quality companies which have long records of rising earnings, rising dividends, sensible capital allocations, and no major stupid decisions. Pick a method of valuing each based on current PE and growth rate. Put an equal amount of money in each of the half of the stocks that have the best "calculated price" to "current stock price" ratio. Whenever one you own goes too high, trade it in for the best value of those you do not own. The tough part - whenever a company makes a big stupid decision, or becomes non-analyzable for some reason, redline it (stay out of it) for 5-10 years.
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Old 02-18-2009, 01:48 PM   #28
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Average return
Old 02-19-2009, 04:05 AM   #29
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Average return

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The TSP sent me my annual statement and seemed to figure out my rate of return by not counting my annual contributions. Something like -37%.
Never really looked at those statements. I am down 7% but when I look at the current value divided by the lifetime contributions, I get 2.0. So 100% in 24 years. Average of 4% per year. (End of 2008!) Another interesting thing is current year contributions $26K, losses for 2008 $26K. Someone is eating my contributions (chuckle).

But it does show the type of differences/confusions in total savings that we encounter between the SWs (still working) and the REs in these discussions.
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Old 02-19-2009, 05:03 AM   #30
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There is no one investment answer.
Asset allocation and diversification. It works. You won't escape the carnage, but you'll emerge with more skin than others.
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Old 02-19-2009, 06:33 AM   #31
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The TSP sent me my annual statement and seemed to figure out my rate of return by not counting my annual contributions. Something like -37%.
They say it's some sort of time-weighted system. My TSP annual statement says my rate of return was -12%. Not bad, eh? Nyah, nyah, gloat gloat!! no, not really! There is nothing to gloat about. I lost correspondingly more in my other investments. My lower losses in the TSP were by no means due to astute investing, but instead they were simply due to my AA strategy.

The reason it looks so good is that I DCA'd into the G Fund for the first nine months of the year, since my plan is to eventually get to 100% G Fund as part of the bond portion of my AA. As you know, G Fund is a government treasury bond fund that does not lose value. I suspended DCA'ing in October, but right now, with market losses I am at nearly 88% G Fund.

Most of my losses were outside of the TSP. For example, my Roth IRA lost 34% in 2008 - - oof.
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Old 02-19-2009, 08:33 AM   #32
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Yeah, I'm 20% in G fund. Bulk of my losses were in the C, S and I funds.
My roth took a beating too, its value fell below what I have into it.
Oh well...
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Old 02-19-2009, 09:20 AM   #33
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Down about 32% from the all-time high.

Conversely, if I'd been in CD-like instruments all these years, I'd have maybe $150k less than I do now, though I wouldn't have "lost" anything. I'll take that trade...
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