What's been your 5 year average return?

[Trapshooter]

It's kind of fun to see how other people did. However, I don't really believe the numbers. I'm sure a few posters calculated correctly and were honest about results. Also their AA is not my AA. Also everyone has cash flows which make these calculations questionable at best.

Here are 5 year results and 1 year results for two balanced funds which currently have 66% stock allocations:

DODBX  11.95%  1.8%  Dodge & Cox balanced
VWELX  12.57%  8.6%  Vanguard Wellington

I would be lying if I told you what my 5yr result is because the cash flows are just too wierd to deal with. I can deal with the cash flows for this year and so far this year my return was ...... drum roll ...... something like 8.3% for a 55% equity portfolio. Those TIPS helped. U.S. to foreign equity ratio is 2:1. The U.S. part is tilted to large growth currently.

Since Trek started this perhaps he'd like to step up to the plate?

Why wouldn't you believe other people were honest about their results? I don't see anything outlandish. In my case there are no cash flow issues to complicate the calculations. An IRA that was rolled over from a 401-k. No deposits, no withdrawals, no taxes. Just compare balance from one year to the next.

 

[Lsbcal]

Why wouldn't you believe other people were honest about their results? I don't see anything outlandish. ...

Didn't mean to really impugn the motives of any of the posters. It's just that when talking about a 5yr period one can make a lot of mistakes. I'm sure everyone intended to post correct results.

 

[Milkman]

My 5 year average return is 12.3%.

Milkman

 

[Ed_The_Gypsy]

Originally Posted by retire@40
2003: 3.85%
2004: 4.18%
2005: 3.42%
2006: 7.06%
2007: 11.27% (through 11/30/07)

Average ROI: 5.956%

I calculated an average return for these five years to be about 5.92%.

In case someone would like to know the method:
total return over all five years as a percentage = 100*((1.0385 * 1.0418 * 1.0342 * 1.0706 * 1.1127) - 1)
= 33.29%
to get the 5-year average annual return:
10^(log(1.11329)/5)
= 10^(0.1248/5)
= 10^(0.024960)
= 1.05916
or as a percentage, (1.05916 - 1)*100 = 5.92%

If we are talking $1,000,000, then the difference is about 0.036% per year or about $360/year or about $2,267 (0.227%) over 5 years.

So, 5.956% is not accurate, but over this range the difference is small.

 

[DJRR]

2003 38.00%
2004 28.00%
2005 18.00%
2006 13.73%
2007 13.55%

CAGR for 5 years = 21.90%

Allocation - 100% equities, no new money added except IRA contribution on 1st day of the year, following mutual fund momentum strategy.

 

[Gumby]

..

 

[HFWR]

2003 - 14.7%
2004 - 7.4%
2005 - 10.8%
2006 - 14.5%
2007 - 6.7%

TR = 66.8%
CAGR = 10.8%

YCMV; I ran out of fingers AND toes...

 

[calmloki]

The 5-year annualized return of a Merriman (FundAdvice.com - Home) slice-and-diced Vanguard portfolio with 75% equities and 25% bonds is around 16.6%. (Calculated by Morningstar portfolio manager). Ticker symbols in the portfolio: NAESX, VDMIX, VEIEX, VFINX, VFTSX, VFITX, VGSIX, VISVX, VIVAX, VTRIX.

The 1-, 3-, 5- returns are 8.7%, 12.7% and 16.6%.

I'm not finding that portfolio - closest seen is this:
VANGUARD BALANCED - BUY-AND-HOLD
($50,000 minimum) 6%Vanguard 500 Index(VFINX) LCB
6%Vanguard Value Index(VIVAX) LCV6%Vanguard Small Cap Index(NAESX) SCB6%Vanguard Small Cap Value Index(VISVX) SCV6% Vanguard REIT Index (VGSIX) REIT12%Vanguard Developed Markets Index(VDMIX) Int'l LCB
12%Vanguard International Value(VTRIX) Int'l LCV
6%Vanguard Emerging Market Index(VEIEX) EM20%Vanguard Intermediate Term US Treasuries
(VFITX) Inter. Bond
12%Vanguard Short Term Treasuries
(VFISX) Short Bond
8% Vanguard Inflation Protected Securities (VIPSX)TIPS
which is a 60/40 mix - what porfolio are you looking at?

 

[Salaryman]

16.3% last five years annualized. Thanks to the international investments, especially in emerging markets.

 

[novaman]

5 year annualized return.....24.67%

 

[TickTock]

2003-2007 annualized return: 15.8%

Passively managed funds. 80/20 equity/bond AA.

lsbcal,

I'm still in accumulation phase. I use the simplifying assumption that total amount invested over the year is equally added over each month. It's not correct, but pretty close. I'm happy with the method.

Trek,

For a single fund I'd recommend a balanced fund that comes closest to your desired AA.

For two funds, a US Total Stock Market and Short Term Bond fund.

For three funds, the above two plus a Total International Stock Market fund.

 

[JB]

My annualized 5 year return is somewhere between 12-14.5% depending on how I account for withdrawals. To calculate my one year return I take the
previous years closing value and compare it to the current years closing plus the amount I withdrew. People who are generating earned income have a similar issue when calculating return.

 

[W2R]

A stanking 12.5% annualized for me. Given that theres no single stock risk, and a ridiculously low risk premium factored in (as in half the 5 years having most of my money in wellesley)...not so bad.

That is a GREAT return, under the circumstances, even considering the great market returns for the first four years. Why did you get out of Wellesley? To get a higher return? I am planning to put 30% of my nearly mythical inheritance (should the banks ever let me have it) in Wellesley because it looks like a good investment for someone in ER that wants assured income (even if it isn't staggeringly high).

And why are we excluding real estate? I've made about 450k over the last 5 years in three separate transactions. That would bump my numbers up a tad.

The OP can speak for hirself, but if one wants to see how well others did in the stock/bond market, real estate should be excluded. Real estate appreciation seems to be very much affected by regional real estate dynamics.

If I feared risk and volatility, I'd pay off my debts including my mortgage and put the rest in a 60/40 balanced index and not worry about the volatility.

I fear risk and volatility, and I have paid off my debts including my mortgage. My plans for ER would have just 45-50% equities, though, instead of 60%, for "Plan A" (which assumes my inheritance comes through as expected). For "Plan B" (in which the inheritance does not play a part) I'll have to do 60% equities and just be tough minded!

 

[SecondCor521]

Vanguard tells me 11.8%, which is where the vast majority of my money is now. They tell me this is an IRR calculation, and by the sounds of it they've accounted for any cash flows in/out. The Vanguard funds are all either tax-deferred or don't generate enough income to generate taxes, so no adjustment necessary for taxes.

That number excludes the effects of the divorce, selling two houses and buying two others, and income on some other investments, and a small 401(k), so in reality I have no idea.

2Cor521

 

[cute fuzzy bunny]

That is a GREAT return, under the circumstances, even considering the great market returns for the first four years. Why did you get out of Wellesley?

I got married and my wife wanted to keep working part time. We didnt need...or want...the high income level and its associated taxes. With a trickle of an income stream I could also take more chances and be less concerned about volatility. I ended up recently buying back into the fund as our new house, its 2x utilities and property taxes (etc) mean a little more income is useful and we've done well enough that I dont need to keep swinging for the fences.

The OP can speak for hirself, but if one wants to see how well others did in the stock/bond market, real estate should be excluded. Real estate appreciation seems to be very much affected by regional real estate dynamics.

Fair enough, but the question had to do with return on invested money. I know plenty of people dont consider their primary residence an investment, but I do. What, where and when I buy are factors for potential future return. Stock/bond appreciation also has a big effect in how its 'regionalized'

 

[kumquat]

Our NW has tripled in the last 5 years. No idea what the return has been. Can't be bothered to look up how to calculate it.

This came by [-]careful AA blind luck[/-] whatever (letting one stock become > 50% of NW). (Yes I have sold a lot to diversify but the damn thing keeps going up)

 

[Moemg]

The OP can speak for hirself, but if one wants to see how well others did in the stock/bond market, real estate should be excluded. Real estate appreciation seems to be very much affected by regional real estate dynamics.

What about the members on here who invest in real estate instead of the market ?

 

[W2R]

What about the members on here who invest in real estate instead of the market ?

Well, if it is an REIT like VGSIX or something, sure - - but if it is your own personal home, it does seem to me that the appreciation could be thought to have a strong regional component. So, althought I'm not trying to speak for the OP I am speculating that investments (rather than real estate such as a home owned in own's local area) is what was intended.

 

[W2R]

I got married and my wife wanted to keep working part time. We didnt need...or want...the high income level and its associated taxes. With a trickle of an income stream I could also take more chances and be less concerned about volatility. I ended up recently buying back into the fund as our new house, its 2x utilities and property taxes (etc) mean a little more income is useful and we've done well enough that I dont need to keep swinging for the fences.

That makes a lot of sense. Thanks.

Fair enough, but the question had to do with return on invested money. I know plenty of people dont consider their primary residence an investment, but I do. What, where and when I buy are factors for potential future return. Stock/bond appreciation also has a big effect in how its 'regionalized'

But would you would move your family, including adorable, sweet, bright little Gabe, and live in squalor in rural Alabama if low end housing there happened to be appreciating more there than high end housing where you presently are? OK, that was rhetorical but you get what I'm saying, I think. It seems to me like buying a home is such a complex issue. Many who live in areas that aren't appreciating, really are tied to those areas or prefer to live there for a number of reasons unrelated to investment that may influence their decision to buy there. However astute an investor one may be, there may be regional influences that can't be overcome. Otherwise, I think we would have to agree that Californians are nearly all great investors and Midwesterners mostly aren't, for example. I am not so sure that's a valid generalization.

ETA: Oh, and then I forgot to mention. When my ex was in the Navy, we lived in San Diego. Then we moved to Texas, and sold the house in S.D. (making a killing). When we moved from Texas, we didn't make nearly as much. So, he became a worse investor as he got older? (grin)

 

[Moemg]

Well, if it is an REIT like VGSIX or something, sure - - but if it is your own personal home, it does seem to me that the appreciation could be thought to have a strong regional component. So, althought I'm not trying to speak for the OP I am speculating that investments (rather than real estate such as a home owned in own's local area) is what was intended.

What if it is several rental properties ? Are they not investments?

 

[TickTock]

I'd count rental properties.

I'd also personally expect better return for the rentals than from my portfolio, to compensate for the extra time and effort.

[edit]

Or reduced volatility

[/edit]

 

[calmloki]

What about the members on here who invest in real estate instead of the market ?

Dunno - Sold 2 little places early in the year for $300k the pair. Bought one 6-89 for 21K, Gal brought the other into our relationship - she and her ex had bought it for $11K when the prior owner was going to raise their rent to $100/month, then she bought out her ex three years later with it valued at $18k. We spent plenty to upgrade them a bunch (complete re-wires, new sheetrock/floor plans), paid them off, rented them out for decades, borrowed against them several times to buy other places, paid them off, kept collecting rent.... When we sold we were getting $685 and $750/month as rent. I do know that we were only negative cash flow a couple years, usually when we had major remodeling/roofing/new loan expenses. Never had consecutive negative years. For us it seems like it was sort of like a Wellesly type fund that returned maybe 5%/year and then sold for 7.5 times the purchase price after 18-20 years.

 

[cute fuzzy bunny]

But would you would move your family, including adorable, sweet, bright little Gabe, and live in squalor in rural Alabama if low end housing there happened to be appreciating more there than high end housing where you presently are?

Of course not. But I did buy into the bay area, sacramento and yuba city areas when I felt they were underpriced and where I had been living was feeling overpriced.

I certainly made conscious decisions that produced large chunks of positive cashflow. I'd expect to feel like an idiot had it gone the other way and I'd lost money and was looking for a government handout to cover my losses. Given the downside, I also feel its reasonable to accept the upside.

Further, I chose to pay cash for the homes (getting a nice additional discount for closing speed and certainty of close) and use the property as a component of my investing strategy.

Certainly the OP is entitled to discuss things the way they want, and I'm well aware of the emotional issues associated with treating the primary residence as an investment.

But gosh darn it, I've made a bunch of money on every house I ever bought, and lived in them for free all the while!!

 

[Spanky]

Our NW has tripled in the last 5 years. No idea what the return has been. Can't be bothered to look up how to calculate it.

This came by [-]careful AA blind luck[/-] whatever (letting one stock become > 50% of NW). (Yes I have sold a lot to diversify but the damn thing keeps going up)

That's 24.57%.

 

[TickTock]

Assuming no outside additions to the portfolio, yes. Otherwise, that's the same mistake the Beardstown Ladies made when calculating their returns...