Poll: What proportion of your portfolio is due to market growth ?

[Koogie]

There has been a lot of talk lately, as there often is at this time of year, about rates of return. It is often pointed out that a single yearly return is of little importance in the long run and that it is the the long term return which matters.

Considering that we all should be concerned then with the total long term return in our portfolios it beggars the question; what has yours been ?

What proportion of your portfolio has been a result of old fashioned hard work and saving and how much has been supplied by Mr. Market ?

Some people will only have a rough idea. Others will rush to their software or spreadsheets and be able to pin it down to the dime as of 15 mins. ago...

As always, feel free to moan that the poll was done wrong.. that's tradition after all...

 

[2017ish]

...

As always, feel free to moan that the poll was done wrong.. that's tradition after all...

Poll, what pole?

 

[bradaz2488]

If I understand the poll correctly. The only way I can calculate this is to use my total net worth. I have keep track of how much I have saved since 1990 and I used these funds to invest, buy cars and pay off houses. I can not do just "investments" because I do not have the cost bases from investments that I held years ago and sold to buy other investments. Every time you sell it resets your cost bases. For me I took total money saved since 1990 / Total Net worth X 100 and got 61.141%...

 

[Big_Hitter]

you mean portfolio value less raw contributions?

how on earth do you calculate that back to the mid-80s?

 

[REWahoo]

you mean portfolio value less raw contributions?

how on earth do you calculate that back to the mid-80s?

Didn't you keep a record of your contributions?

 

[Gotadimple]

Well one could go back all the way to when one started allocating savings - for me that would be when Traditional IRAs were introduced. That would be a science experiment. Or one could look at the value of your portfolio when there were no more contributions and compare it to today.

Or if you really want to make is simple: the value of your portfolio in November 2008 (the lowpoint in my portfolio after the great recession and meltdown), compared to December 2016. For me: 35% increase - and I made no contributions since 2008 to my portfolio.

Rita

 

[Big_Hitter]

Didn't you keep a record of your contributions?

I'd have to go through 30 years of benefit statements, what a pita

For the pre-tax 401k/PS, it doesn't matter since all of that will be taxable

I have an after-tax thrift where the employee contribution number has to be maintained for tax purposes, the rest of the portfolio - real estate, munis, div stocks etc are all post-tax so I've never really tracked anything, well except for what I paid for the real estate - will take a hickey this year on a sale

 

[W2R]

What proportion of your portfolio is due to market growth ?

It's too complicated for me.

If I was in the accumulation phase, sure.

I suppose possibly I could dredge up old contribution records from somewhere-or-other. One could only hope these old records would be complete. Of course, some contributions were to taxable accounts and some to tax sheltered accounts. (groan)

But gee, I'm retired and withdrawing by now. I bought a house, a car, and lived for over 7 years on my portfolio. So, I guess I'd have to also produce withdrawal records and evaluate them somehow according to what year (and month?) I made each withdrawal.

I don't think comparing contibutions with whatever my current portfolio balance happens to be, adjusted by weighted withdrawals, would mean much. I think my calculations would quickly be dragged far, far into the deep mud at the bottom of this computational swamp.

So, my answer is a firm and decisive "LOTS!"

 

[Big_Hitter]

benefits plus expenses equals contributions plus investment earnings

 

[EastWest Gal]

Given the many elements of my portfolio: two 401ks, a 403b, after tax investment portfolio, inherited IRA x2, inherited farm property owned in the family since 1908, inherited after tax investment portfolio of stock purchases starting back in 1958, with multiple stock splits prior to inheritance, I have no idea. But it must be at least 75%.

 

[pb4uski]

I don't have contributions data going back far enough to compute what is being asked for.

 

[Spanky]

100% due to growth?

 

[REWahoo]

100% due to growth?

New math.

 

[NW-Bound]

Didn't you keep a record of your contributions?

I certainly did not.

I can go back and look at our 401k/IRA contributions, maybe. About my after-tax accounts, money flows in/out all the time, so it's not possible to go back to look. I don't think I keep every financial record going back 40 years, of several accounts that I moved money to/from, merged, opened and closed, etc...

Even if it could be done, how the heck would I want to spend time to do that? So, I cannot answer this poll.

 

[W2R]

New math.

I love this forum because topics come up that I haven't thought of for decades, like new math. I enjoyed reading the Wikipedia article, and discovered much to my delight that back in the 1960's I had both new math and old math required in my math classes. Matrices, Boolean algebra, bases other than 10, and so on, were probably the coolest thing I ever learned in junior high school and inspired a lifelong love of mathematics. At my school, new math didn't mean that I could skate on learning "old math" such as arithmetic and algebra.

OK, didn't mean to divert the thread

Despite a strong background in new math, I was pretty confused by Spanky's post too. Maybe his employer contributed everything to his retirement accounts?

 

[MichaelB]

Let's see.

((Years in retirement x average budget) + college withdrawals + real estate)) divided by (original portfolio value when I quit working) = about 2/3.

Current portfolio = original portfolio x 1.25

So, (1/3 OP) / (1.25 OP) = 26%, which would be my original contribution value. Therefore, Ms Market + Mr Inflation have contributed about 74% of my current portfolio. More or less ..

edit to add - if I include my own "portfolio alpha value add" in the post-work era - IOW, my messing with the portfolio asset allocation, I think Ms Market and Mr Inflation have added 100% and I've wasted 24% with bad investment choices. The biggest portfolio contributions I've made is sharply reducing my meddling.

 

[W2R]

Let's see.

((Years in retirement x average budget) + college withdrawals + real estate)) divided by (original portfolio value when I quit working) = about 2/3.

Current portfolio = original portfolio x 1.25

So, (1/3 OP) / (1.25 OP) = 26%, which would be my original contribution value. Therefore, Ms Market + Mr Inflation have contributed about 74% of my current portfolio. More or less ..

No no no!! You can't use your portfolio value when you QUIT working. You have to use it from the month you made each contribution. It's not like it didn't grown while you were in the accumulation phase.

 

[MichaelB]

No no no!! You can't use your portfolio value when you QUIT working. You have to use it from the month you made each contribution. It's not like it didn't grown while you were in the accumulation phase.

Oh. Dang. Then I have absolutely no idea, but it has to be more than 100%, not including currency exchange loss.
.
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https://www.youtube.com/watch?v=V3FnpaWQJ

 

[NW-Bound]

It is possible to compute the average rate of return in the presence of deposits and withdrawals. It has a mathematical definition, which is implemented in the Excel function XIRR.

But to answer "how much of the portfolio is due to return", we must first define it.

Suppose you are about to pull the plug, and sit down to figure out your savings. You now have $1M in your 401k, and over the years have put in $200K, and your employer $200K. The total deposit is $400K. So, you can easily say that 60% of the 401k comes from market gain plus inflation.

Now, armed with $1M ($400K deposit + $600K gain), you start your retirement. Twenty years later, after drawing a total of $1M for living expenses, you find that your portfolio is still at $1M. How do you define how much in there is the original contribution?

 

[Big_Hitter]

Now, armed with $1M ($400K deposit + $600K gain), you start your retirement. Twenty years later, after drawing a total of $1M for living expenses, you find that your portfolio is still at $1M. How do you define how much in there is the original contribution?

lifo, fifo or pro-rata

pick one and rock on

(I should put that in my sig)

 

[aja8888]

I can't find my initial contribution records from 1973 when I started in the Anaconda thrift plan. Then the company was bought by ARCO in 1977 and my funds were converted to ARCO stock. I don't have that information at my fingertips. Can anyone help me here? I don't think there were computers in 1973?

When the divorce hit in 1989, Ex-DW turned all the paper records over to her lawyer so I am missing 15 years of paper statements. ExDw is not with us anymore and her lawyer died too, so I am SOL on contributions and CD rates of return for those years (she "took" the CD's too).

Ok, I'll guess: 5% since inception (whenever that really was).

 

[NW-Bound]

lifo, fifo or pro-rata

pick one and rock on

(I should put that in my sig)

The IRS counts the withdrawals as taken from the principal first when the taxpayer draws from his Roth IRA. This includes the deposits, and then the tIRA conversions, before the gains. So, this is not quite the FIFO (first-in-first-out), but "principal first before any gain".

So, using the IRA rule, one will use up all the principal first, and before long his portfolio is 100% gain. There's your "IRS math", not "new math".

 

[ABQ2015]

Not much so not that difficult to calculate.

 

[aaronc879]

I'm not sure how to figure the exact amount but I know it's not very high. I have done horribly bad at investing. I sold most equities during the downturn in approx. 2008. Then I bought back in in 2010 but only until 2012 when I thought the market was overweight and due for a correction. I had almost no equities after I sold when the DOW reached 12,000. I finally bought back into equities at around 18,000. With I could go back in time and just maintain a predetermined AA but I can't. I now hold around 75% equities and plan to hold for decades. Of course that probably means they will drop 40% next year.

 

[calmloki]

Cool! Another advantage to rentals - this is easy to answer. 0-5%. The "Portfolio" has made roughly rounding area amounts.