2006 Annual Returns

[grumpy]

Well, I just finished updating the spreadsheet I use to track all of my accounts for 2006. By comparing to the sheet I saved at the end of 2005 I was able to calculate total annual returns for various categories:

Taxable Accounts (includes MM, I-Bonds & individual stocks & 1 MF) 11.1%
Tax deferred accounts 14.6 %
Withdrawal rate 2%

This was from a portfolio allocated as follows:

Equities 77%
Large Cap 41%
Mid Cap 12%
Small Cap 8%
Int'l 15%
Fixed Income 14%
Cash 9%

I plan to do a bit of rebalancing to bring equities back down to 75% and replenish the cash I withdrew.


Anyone else care to share their results?

Grumpy

 

[LOL!]

Here are a set of reference returns for asset classes that I got from Vanguard:
Large cap domestic VFINX: 15.6%
Mid cap domestic VIMSX: 13.6%
Small cap domestic NAESX: 15.6%
Large cap international VGTSX: 26.6%
Small cap international VINEX: 30.3% (not an index fund, closed to new investors)
Emerging markets VEIEX: 29.4%
REITs VGSIX: 35.1%
Total bond VBMFX: 4.2%

So if you had an all equity portfolio of 33% large cap domestic, 33% small cap domestic, and 34% large cap international, your benchmark return would be:
0.33 * 15.6 + 0.33 * 15.6 + 0.34 * 26.6 = 19.3%

Value indexes did better than growth indexes. If you used value funds or added in REITs, small cap international or emerging markets then you goosed your returns.

A 60:40 equities:bonds portfolio with the above equity allocation would then be
0.60 * 19.3 + 0.40 * 4.2 = 13.3%.

Dodge&Cox Balanced fund returned 13.9%
Vanguard Target 2045 (VTIVX) returned 16%

 

[Nords]

Interesting. I'm glad we go through these types of questions. I thought I'd set up the wrong reporting parameters, and it took me a while to realize that I was comparing apples & oranges.

Quicken's ROI reports 16.47%. That's "Return on investment is defined as Return divided by Amount Invested. ROI indicates how well a security has performed: it is the total profit (if ROI is positive), or loss (if ROI is negative), you would have from a security if you sold your shares in it today. ROI is expressed as a percentage of the amount you invested in the security. ROI takes account of the current market price and includes previous sales of the security and income received from the security."

Quicken's average annual return (IRR) reports 23.66%. That reflects the annualized returns on all the investments we bought & sold this year, which doesn't really provide a true picture of performance since some of those stocks were only held for a few months.

The ER portfolio is split among:
31% Berkshire Hathaway
20 Powershares International Dividend Achievers ETF (PID) (IRAs)
15 iShares S&P600 Small-cap Value ETF (IJS) & spouse's TSP
10 Tweedy, Browne Global Value (TBGVX, our last mutual fund)
10 Other individual stocks, including 3.2% Tate & Lyle PLC (makers of Splenda)
8 iShares DOW Select Dividends ETF (DVY)

... and 6% cash.

A bit over 80% of the portfolio is in taxable accounts. PID is the vast majority of our IRAs and spouse's TSP is in the "S" small-cap stock fund. After we finish the Roth IRA conversions (paying the taxes out of taxable funds) then if there's a buying opportunity we'll probably clean up the leftover bits & pieces in the IRAs to make them all PID.

I need to check the cap gains tax rates for the next few years-- IIRC they go down in 2008 & 2009. If the market pulls back 5-10% then we'll take cap gains in TBGVX and buy more DVY & IJS.

Otherwise I don't see any reason to mess with success.

 

[Helen]

For those still contributing to accounts, how do you compute your annual return ?

For example, in 2007 I will contribute $15,500 over the course of the year. Should I compute it as though I contributed as one lump sum ?

-helen

 

[Helen]

For those still contributing to accounts, how do you compute your annual return ?

For example, in 2007 I will contribute $15,500 over the course of the year. Should I compute it as though I contributed as one lump sum ?

-helen

I know, I'll use the Beards Town Ladies equation and count my contributions as gains !

 

[LOL!]

For those still contributing to accounts, how do you compute your annual return ?

There seem to be 3 major legitimate ways to do this:
1. Use MSMoney
2. Use Quicken
3. Use MSExcel and the XIRR() function

In all the above methods, one must enter all the transactions with their amounts and dates.

With MSMoney and Quicken you have to create the right report over the right time period and read the right column in the report. We have some accounts/funds at Vanguard that we have neither added to nor subtracted from, but have had reinvested dividends. The MSMoney "Annual % return" for those accounts matches Vanguard-reported YTD return.

As an aside, today's paper reports that the S&P500 was up 14% in 2006, but that has to be without dividends.

 

[Corporateburnout]

Quicken says:

13.66% tax deferred and brokerage (64% equities 36% bonds & cash)
6% emergency funds

 

[Gumby]

Since I don't have the time or energy to calculate the rate of return properly, I just take the final balance, subtract the total contributions for the year, and calculate the increase over last year's final balance.

Using that simplistic calculation, we were up 16.1% on a portfolio allocated about 75/25 stocks/bonds.

 

[DRiP Guy]

Since I don't have the time or energy to calculate the rate of return properly, I just take the final balance, subtract the total contributions for the year, and calculate the increase over last year's final balance.

Using that simplistic calculation, we were up 16.1% on a portfolio allocated about 75/25 stocks/bonds.

I believe that will be a bit optimistic, since you leave behind the gains that money you just subtracted earned, but certainly good enuff for gov'mint!

 

[justin]

I do what Gumby does, except for each quarter of the year. In other words, I take (END_VALUE - CONTRIBUTIONS)/BEGIN_VALUE - 1. I prepare a "Quarterly Financial Statement" that shows account values for taxable accounts, DW and my traditional and roth IRA's all over, and DW and my 401k accounts. To get at a yearly percent return, I multiply out the returns for the 4 quarters (1+Q1return)*(1+Q2return)*(1+Q3return)*(1+Q4return).

Here's the numbers:
Q1: +5.56%
Q2: -1.42%
Q3: +3.03%
Q4: +8.05%

2006 Total results: 15.84%

That's with a mostly stock mutual fund portfolio and a significant portion in international funds. Pretty good on it's own, but not spectacular versus the market index results.

I get 18.35% if I use my method except look at (Dec 31 value - 2006 investments)/Jan 1 value - 1. Interesting that changing the analysis method changes the results by 2.5%.

I'm also getting a large enough portfolio value that market returns are a significant factor in portfolio growth as compared to investment contributions I make. 33% of my portfolio increase was due to market returns whereas 66% of my portfolio value increase was due to investment contributions.

I don't think 2007 will be as rosy as 2006.

 

[CyclingInvestor]

22% in 2006 from a portfolio nearly 100% in individual stocks.
Portfolio averaged roughly 20% REIT and 80% large cap, all
with histories of strong dividend growth, solid financials, and
competent, shareholder friendly management (IMO).

 

[kcowan]

38.7% in individual stocks accounts (about 50% of total NW)

Other holdings await paper statements.

What a great year! Gotta love that rising tide...

 

[HFWR]

14.5% give or take...