Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 03:47 PM   #21
 
Posts: n/a
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by retire@40
ROI isn't really important. Sure, having a high ROI helps grow your money, but it isn't as important as net worth growth.

You could have fantastic ROI for a number of years and not have any money at the end of those years if you LAYM. You could have a low ROI, but have plenty of money if you LBYM and saved.

Tracking your net worth is far more important than tracking your ROI.

Net Worth Growth is only important for an invester that is not drawing down on his portfolio. A retiree could have net worth shrinkage, but because of a great ROI is comfortable.

ROI is the only meaningful number - Net Worth Growth might be meaningful to you, but it cannot be compared to the investing community.

For example if Investor A has $100 net worth, and saves $1000 the next year, but loses $500 of it due to bad investments. His net worth growth is over 500% - Sounds great doesn't it!

Only when he states his Rate of Return could he be compared with any other investor. Telling me that Investor 'A' had a 500% Net Worth Increase - Tells me nothing at all!
__________________
  Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 04:30 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Re: Observations on "Actual Average ROI" poll

Since my 401k provider changed, I only have data back to 4/1/2002. I had other data, but my HD crashed...

Per the 401k website:

4/1/2002 - 12/31/2002: -17.5%
1/1/2003 - 12/31/2003: +14.7%
1/1/2004 - 12/31/2004: +7.4%
1/1/2005 - 12/31/2005: +10.8%
1/1/2006 - 5/2/2006: +8.7%
4/1/2002 - 5/2/2006: 26.8%

How is Your Rate of Return calculated?
Normally, you analyze an investment based on its Beginning Balance, its Ending Balance, and the schedule of Cash Flows between these 2 balances. Your Rate of Return is calculated as the Rate of Return for your particular Beginning Balance, Ending Balance, and schedule of Cash Flows. A compound daily rate of return is computed by testing different rates until one is found that increases (or reduces in the case of a loss) your beginning balance and all of your cash-flows to equal your ending balance within 0.00000000001%. Then the actual account performance during the investment period is calculated.


Portfolio Growth - 4/1/2002 - 4/1/2006: 61.99% (based on my spreadsheet)
__________________

__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 04:41 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,382
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Cut-Throat
ROI is the only meaningful number - Net Worth Growth might be meaningful to you, but it cannot be compared to the investing community.
I agree with this for a retired investor. But for his ROI to be meaningful, he must believe it has something to do with his skill or method and not just derive from a fortuitous period of market history. To be meaningful, there should be at least one and preferably more trough to trough periods.

For many of us, this is a longer time than we have been at it. Hence however good or bad our returns may have been in the past, the future starts a new chapter.

Ha

__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is online now   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 04:53 PM   #24
 
Posts: n/a
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by HaHa
I agree with this for a retired investor. But for his ROI to be meaningful, he must believe it has something to do with his skill or method and not just derive from a fortuitous period of market history. To be meaningful, there should be at least one and preferably more trough to trough periods.

For many of us, this is a longer time than we have been at it. Hence however good or bad our returns may have been in the past, the future starts a new chapter.

Ha

Yes, I agree it has to be for the same time period. Rate of Return for 2005 for example!

- And as far as skill goes, I admit I not very good. I'm an index investor because I believe I'm not any better than a majority of 'professional money managers'
__________________
  Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 05:20 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Martha
You win the bizzaro analogy of the day award.
Dont I always?

At least when I manage to show up...
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 06:07 PM   #26
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by HaHa
Sam, thank you for the summary and your action points. What reasons cause you to make the suggestions that you make?

Ha
Ha, my reasons are very simple:* The commonly accepted 4% SWR is based on historical ROI of the market since the late 19th century.* What I'm doing for myself, is using my own historical ROI since I started saving.

Sam

__________________
Sam is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-03-2006, 08:17 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Sam
Ha, my reasons are very simple:* The commonly accepted 4% SWR is based on historical ROI of the market since the late 19th century.* What I'm doing for myself, is using my own historical ROI since I started saving.
Yep!* Your historical ROI since you started saving definitely is an accurate predictor of the ROI you can expect for the next two or three decades.* Guaranteed!* Take it to the bank! :
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-04-2006, 11:00 AM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Observations on "Actual Average ROI" poll

Sam - consider the alternative theory. You're looking at a series of returns produced by the greatest bull market in history, with a small, short lived bear in the middle of it.

By historic standards of every stock market/economy in world history, we're now due for a long crappy period to compensate for that to produce the rough mean returns that we've seen...historically.

Now, if everythings different...then maybe you can take 6, 8, 10%.

Or maybe you'll get killed taking 2.

This is the same line of thinking that says "We hired a team of researchers who evaluated President Bush 4000 times in the last six years. At every evaluation, he was alive, healthy, and the president. Therefore we have determined that Bush will live healthy and forever, and will always be president".

Good luck with that
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-04-2006, 11:23 AM   #29
Thinks s/he gets paid by the post
 
Join Date: Mar 2006
Location: Houston
Posts: 2,155
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Cute Fuzzy Bunny
Now, if everythings different...then maybe you can take 6, 8, 10%.

Or maybe you'll get killed taking 2.
CFB,

I hear you, loud and clear.* Since there is a chance of getting killed at 2, 4, or 6, I'll take the latter.* I'm funny that way*

Sam
__________________
Sam is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-04-2006, 12:25 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,697
Re: Observations on "Actual Average ROI" poll

So you mean we're stuck with Bush forever?

****!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-04-2006, 12:53 PM   #31
 
Posts: n/a
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Cute Fuzzy Bunny
So you mean we're stuck with Bush forever?

****!
I think we're stuck with the damage he's done forever!
__________________
  Reply With Quote
Re: Observations on "Actual Average ROI" poll
Old 05-04-2006, 01:26 PM   #32
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: Observations on "Actual Average ROI" poll

Quote:
Originally Posted by Cute Fuzzy Bunny
By historic standards of every stock market/economy in world history, we're now due for a long crappy period to compensate for that to produce the rough mean returns that we've seen...historically.
This is where Seigel chimes in to tell us that dividends will rescue us from bankruptcy.

I think that dividends were the only thing to keep 1966-82 from turning into a repeat of the Depression. Imagine if you'd kept reinvesting from 1973-4... or from 2001-2.

Quote:
Originally Posted by Cut-Throat
I think we're stuck with the damage he's done forever!
Hey, we recovered from Nixon/Ford/Carter then we'll recover from Bush.

Presidents like Hillary, Cheney, & Bush reaffirm my faith in the strength of the country!
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Poll: Average Income Before FIRE PsyopRanger FIRE and Money 63 01-27-2007 11:01 AM
more than average savings- average spending shorttimer Young Dreamers 23 11-04-2006 05:32 PM
Real World FIRE Income Poll, Average Monthly Draw ShokWaveRider FIRE and Money 14 09-12-2006 11:50 PM

 

 
All times are GMT -6. The time now is 02:26 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.