Ports @ August 31, 2017

Happy Labor Day early, FastTrackers,

You know how sometimes when you plod along day by day and then week by week, it seems like you’re spinning your investing wheels? Or is it just me? Seriously, it seems that I’m losing sometimes for long periods and the market does the opposite of what I expect. I guess maybe it’s just the wrong view point. Anyway, my ports have become so complicated–not big, mind you, just complicated–that I can’t accurately figure out my returns by using individual transactions. In fact, I would like to hear how you folks handle this, or if you even do. Maybe you don’t worry about it. That’s probably it. I guess I’m a little gun shy that someone at some point will challenge my statements because, well, sometimes I’m tempted to do just that. Then I regain my senses. Usually.

A couple of months ago, one of our ports received a larger than usual deposit. That’s not an everyday problem in my neighborhood because I retired 16 years ago, so with no income, can’t make deposits in my personal accounts. But my wife works and I take her 401-k and transfer it into her IRA annually. I recently let it slip awhile (ok, maybe it was something like 2-1/2 years) and when I got around to making the transfer, it was large enough that it kind of swamped the account. That wouldn’t be so bad (notice you don’t hear me complaining) but I also invest for a few other people and I recently wised up and starting to use this one small-but-not-the-smallest account (still tiny for a Saul or a Paul, but … you do what you gotta do, right?) for a template I guess you could say, and then buy, sell and trade the same percentages in the other accounts. Are you still with me? Amazing. So now as far as tracking returns I’m kinda lost. It’s time for some port changes anyway and with this little infusion, I almost have to sell everything in all accounts and start over to keep them remotely balanced. But I don’t want to see commissions rack up in the other accounts. See where this is going? On top of that, everyone at Saul’s Deli likes to hear how everyone else is doing, and how do you account for all the changes in a relatively straight line when the real world is all curves? Other than using Microsoft’s XIRR function and entering every single detail of every single transaction, I don’t know how to accomplish such a thing. So I’m just going to show you what I own and what I’ve done, and then run some simple gain calculations on the “template” account.

Recently Bought
MELI Bought twice but didn’t last long. It’s doing okay IMO, not great, but it’s going nowhere and we only have a few months
to double our money this year. :slight_smile:
ANET The harder I look here, the more I’m finding to like. Unless the red flags show up, I’ll probably add shares.
TTD I’m sick of advertising, but the Desk lets their customers chase them as opposed to the Viagra commercials. I like that.

Recently Fired
MELI Got impatient, no regrets allowed. Lost on one load, gained a bit on another. Big whoop.
VEEV Too complicated. For the customer to implement, for me to truly understand. Life’s too short. Adios!
KITE The umpteenth time time I’ve had shares stolen. This time it wasn’t Buffett, who’s robbed me of 3 companies in just the last few years.
LGIH As a retired home designer/builder/contractor, I’m likely industry biased. Probably a mistake.
AAOI Got my butt handed to me. That’s why I said earlier that KITE saved it this time. Oh, my Poor Butt.

Good grief, someone pick Saul up off the floor, I think he’s having some kind of attack and I don’t blame him one little bit. Get him some water and after that, let’s just dive in and if you have questions, fire away. If you’re too bored (don’t blame you for that either) just follow Saul to the infirmary and I apologize. (But give the bill to Saul, ok?)

On the morning of 8/31/17, I knew those changes were due in our holdings and I wanted them for the new month. Here’s what I started out with, and how each holding was doing. “Size” is the percentage of the portfolio attributed to the holding. “Conv” is my strictly subjective level of conviction where 10 would be a SHOP plus guaranteed returns of 50-100% returns for life, and 0 would be a company I ran across the other day that’s been public a couple of years with not one product sold to date. Their plan is to sell the hardware, software and drone for drone security packages for larger homes. I almost coughed up my Wheaties when I read that, but now that I’ve told you about it, they’ll probably become the next Amazon. (Fat chance, I still think.) “Days” is the period a position has been held, “Stra’gy” is a shortcut for Strategy only because TMF’s ‘Table Format’ app is a distant dream (read nonexistent) and these tables won’t work with the extra letter. Think I’m kidding, do you? Ney!

Note the large-ish cash position due to my lazy attendance to transfers from DW’s 401-k. Ouch. And how am I going to buy so many stocks in the middle of the longest, steepest rise for fast trackin’ stocks I’ve ever witnessed?

Notes on Returns: Gains as shown include commission and fee expenses but do NOT include dividends which are in cash. CAGR includes ;all gains, dividends and expenses.

Ports 8/31/17 @ OPEN ordered by size


**Ticker	Equity Name               	Bought   	Size	Days	Conv	Stra'gy	Gain %	CAGR**
TTD	The Trade Desk Inc.       	08/10/17	7.9%	25	3	Watch	(0.7%)	(10.9%)
SHOP	Shopify Inc.              	02/27/17	7.8%	189	8	Hold	80.3%	212.8%
MU	Micron Technology, Inc.   	05/11/17	7.2%	116	3	Watch	11.6%	42.3%
VEEV	Veeva Systems Inc.        	05/10/17	6.6%	117	3	Sell	7.8%	26.9%
KITE	Kite Pharma, Inc.         	07/21/17	5.8%	45	4	Watch	61.8%	6,080.6%
ALGN	Align Technology, Inc.    	05/10/17	5.5%	117	8	Hold	27.8%	118.4%
PAYC	Paycom Software, Inc.     	06/05/17	5.2%	91	3	Hold	13.9%	70.1%
PYPL	PayPal Holdings, Inc.     	05/01/17	4.8%	126	7	Hold	29.6%	114.8%
MA	Mastercard Incorporated   	02/21/17	4.3%	195	8	Hold	21.9%	45.1%
SWKS	Skyworks Solutions, Inc.  	05/01/17	4.1%	126	6	Hold	6.6%	20.9%
FB	Facebook, Inc.            	03/21/17	3.8%	167	8	Hold	23.9%	61.1%
GOOGL	Alphabet Inc.             	03/21/17	3.4%	167	7	Hold	12.2%	29.2%
ANET	Arista Networks, Inc.     	08/23/17	2.9%	12	5	Hold	1.7%	86.6%
MELI	MercadoLibre, Inc.        	05/19/17	2.9%	108	2	Sell	(13.4%)	(39.2%)
FB	Facebook, Inc.            	04/23/15	2.8%	865	8	Hold	106.9%	36.1%
GOOGL	Alphabet Inc.             	05/20/15	2.8%	838	7	Hold	76.1%	28.1%
PAYC	Paycom Software, Inc.     	05/22/17	2.4%	105	6	Hold	15.1%	65.3%
CSX	CSX Corporation           	04/07/15	1.6%	881	6	Hold	53.1%	19.4%
CSX	CSX Corporation           	04/13/15	1.3%	875	6	Hold	53.6%	19.7%
MELI	MercadoLibre, Inc.        	08/21/17	1.2%	14	2	Sell	6.9%	630.5%
(Cash)	USD                       	01/01/17	18.1%	365			0.0%	0.0%

During the day on 8/31 I dumped some losers and some low-conviction stocks which will now rise in price like you wouldn’t believe. That’s ok, it’s just the way it goes sometimes. So here’s what I ended up with at the close. Again, note the cash position after the sales and of course, the transfer hangover from a couple months ago. (Guess I’m too busy posting to study new vesting prospects.)

Ports 8/31/17 @ CLOSE ordered by size


**Ticker  	Equity Name               	Bought    	Size 	Days 	Conv	Stra'gy	Gain %	CAGR**
TTD     	The Trade Desk Inc.       	08/10/17	7.9%	25	3	Watch	(0.7 %)	(10.9%)
SHOP    	Shopify Inc.              	02/27/17	7.8%	189	8	Hold	80.3 %	212.8%
MU      	Micron Technology, Inc.   	05/11/17	7.2%	116	3	Watch	11.6 %	42.3%
ALGN    	Align Technology, Inc.    	05/10/17	5.5%	117	8	Hold	27.8 %	118.4%
PAYC    	Paycom Software, Inc.     	06/05/17	5.2%	91	3	Hold	13.9 %	70.1%
PYPL    	PayPal Holdings, Inc.     	05/01/17	4.8%	126	7	Hold	29.6 %	114.8%
MA      	Mastercard Incorporated   	02/21/17	4.3%	195	8	Hold	21.9 %	45.1%
SWKS    	Skyworks Solutions, Inc.  	05/01/17	4.1%	126	6	Hold	6.6 %	20.9%
FB      	Facebook, Inc.            	03/21/17	3.8%	167	8	Hold	23.9 %	61.1%
GOOGL   	Alphabet Inc.             	03/21/17	3.4%	167	7	Hold	12.2 %	29.2%
ANET    	Arista Networks, Inc.     	08/23/17	2.9%	12	5	Hold	1.7 %	86.6%
FB      	Facebook, Inc.            	04/23/15	2.8%	865	8	Hold	106.9 %	36.1%
GOOGL   	Alphabet Inc.             	05/20/15	2.8%	838	7	Hold	76.1 %	28.1%
PAYC    	Paycom Software, Inc.     	05/22/17	2.4%	105	6	Hold	15.1 %	65.3%
CSX     	CSX Corporation           	04/07/15	1.6%	881	6	Hold	53.1 %	19.4%
CSX     	CSX Corporation           	04/13/15	1.3%	875	6	Hold	53.6 %	19.7%
(Cash)  	USD                       	01/01/17	34.7%	365			0.0 %	0.0%

Also, as we measure our holdings, I don’t know about you, but I know that sometimes my realized gains are actually realized losses. I try to sell losers and grow winners, don’t you? So maybe HOLDINGS don’t present a complete picture. For measurement strategy, what’s left but to go directly
From the Statements


**Month	Gain	CAGR/mo	CAGR YTD**
Jan	1.6%	21.1%	121.5%
Feb	1.4%	19.6%	120.5%
Mar	5.0%	78.2%	137.2%
Apr	-2.6%	-27.2%	117.3%
May	5.3%	82.9%	128.5%
Jun	3.5%	35.5%	132.1%
Jul	4.8%	49.5%	137.6%
Aug	27.7%	779.7%	190.9%

So even if by some miracle the year continues on the same steep slope (I won’t dare count on it and where am I going to find another KITE? Thanks Saul and all!) I still won’t double my investments this year as was my goal. But I did some investigating and discovered I’ve averaged somewhere north of 14% of my ports languishing in cash and earning zip over the last decade. Lately it looks to be averaging right around 17.5%. Not smart or not brave enough? I’m not sure. It’s hard to buy when prices seem to be ridiculously high. But you know . . . we do it and we will continue to do it. I should have used every dime of cash. Ah, the beauty of hindsight, but that was stupid.

Now all I hear these days is “Expect 4-5% returns maximum for the coming years BEFORE TAXES.” But those yahoos haven’t discovered the wonderful folk here in this little corner cafe yet. Sorry, Saul. Really, I mean this corner deli.

Are we having fun yet? What a year. But seriously I need some new companies. What do you folks recommend? If I were 35 again, I think I’d put it all on Red 13. Not really. But I might move to Canada and wait for the birth of Shopify. :slight_smile: That’s going too far now, isn’t it. Yeah, I thought so.

Have a great long weekend and happy hunting,

Dan

things to do:

  1. Buy more SHOP
  2. Buy still more SHOP
  3. bread, milk, eggs, ribeye steaks
  4. Shorten monthly “reports”
  5. Trade Corvette for new Corvette
  6. Don’t tell Mom about #5, it’ll be a “surprise.”
  7. Buy flowers!
  8. See #1
38 Likes

Hi Dan,

Here’s how I deal with that. I ignore individual transactions. All my portfolios are with one broker and they give me a total at the end of each day. So far it’s easy… Then your question: how do you deal with cash additions and subtractions to and from the portfolios without messing everything up?

Here’s how I do it, right from the Knowledgebase, beginning of Part 3.

I retired in July 1996, so I’ve actually been taking out money to live on for the last 21 years, instead of adding money.

Here’s how to calculate your overall returns ignoring cash flow in or out. Say you start the year with $14,000. You want to equate that with 100% and calculate gains and losses from there. So you ask yourself “What number (factor) would I multiply $14,000 by to get 100?”

By simple arithmetic we have 14000 x F = 100

And thus F = 100/14000 = .0071428

Sure enough 14,000 x .0071428 = 100

Now say three weeks later you have $14,740 and you want to see how you are doing, you multiply that number by .0071428 and you get 105.3 (so you are up 5.3%). If you don’t add or subtract money, that factor will work for the whole year.

Now say you add $2300 of fresh money, but you don’t want that to screw up your estimate of how well you are doing.

You add the $2300 to the $14,740 and get $17,040 which is your new balance that you are investing with. That’s your new starting point. It doesn’t affect how you’ve done up to here. You haven’t suddenly done better because you added money. You can’t still multiply by .0071428 because you’d get 121.7 and it would look as if you were up 21.7%, when you are really only up 5.3%.

So you need to change your factor to make it smaller so it will still reflect just the 5.3% gain you’ve made so far. You figure: “What would I multiply my new balance ($17,040) by to get 105.3, to reflect my 5.3% gain so far this year?”

F x 17,040 = 105.3

F = 105.3/17,040 = .0061795

And that’s your new factor. If you multiply it by 17,040, sure enough you get 105.3. Now you continue to see how you will do for the rest of the year.

If a little later you are at $18,000, you multiply 18,000 by .0061795 and you get 111.2, so you know that your investing is now up 11.2% for the year.

Same, if you take money out. You don’t want it to look as if you lost money. You calculate a new factor so you start from the same percentage where you were.

On January 1st of the next year, you write down how you did for the year to keep a record, and start over at 100 for the next year.

Saul

For Knowledgebase for this board,
please go to Post #17774, 17775 and 17776.
We had to post it in three parts this time.

A link to the Knowledgebase is also at the top of the Announcements column
that is on the right side of every page on this board

40 Likes

Just for kicks, let me try another example using this Knowledgebase method.

I start the year with $14,000. So my factor is F = 100/14000 = .0071429.

Six months later I have $21,740 and I want to see how I’m doing. So I
multiply $21,740 by my factor of .0071429 and get 155.29 (I’m up 55.3%).

Now say I add $5,500 of fresh money. What’s my new factor?

F x 27,240 = 155.29

F = 155.29/27,240 = .0057008

At the end of the year my balance is $19,500. I multiply 19,500 by my new factor
of .0057008 and I get 111.2, so my investing for the year is up 11.2%

To recap: I started the year with $14,000, added $5,500, and ended with $19,500.
But I’m up 11.2% for the year!

Ears

11 Likes

The Excel function XIRR will compute this for you.
https://support.office.com/en-us/article/XIRR-function-de124…

I use it and it works well for me.

Enjoy,
Brian

3 Likes

Hi Ears,

You are trying to find out how your investing is doing. Your rise was off a small base. Your decline was off a larger one.

Simple example: You start with $10,000 and it increases to $20,000. Your investing has been great and you are at 200% (up 100%). Now in the second half of the year your stocks take a breather and decline 10% to $18,000 (from $20,000), and you are up 80% for the year.

However, what if your great uncle dies and leaves you $80,000 in the middle of the year? Your base rises from $20,000 to $100,000. You invest just you did in the first example, and sure enough, before the end of the year, your stocks take a breather and decline 10% to $90,000.

You still gained 100% (to a total of 200%) in the first half of the year, and lost one tenth of that 200% back to 180% in the second half. The fact that you were working with more money in the second half than in the first example doesn’t change how skillfully you invested.

So you started with $10,000, added 80,000 and ended with 90,000, but your INVESTING was up 80%. How can that be? Why is that? Well your nice 100% profit of $10,000 in the first half of the year got swamped by the 10% loss (of $10,000) in the second half because you were working with so much more money in the second half.

But you are trying to evaluate how well you were doing investing what you were working with. Well, you made 100% and then lost 10%.

Let’s look at the example you gave:

At $27,240 you were at 155.3% (up 55.3%).
You lost down to $19,500, which is 71.6% of $27,240.

Okay lets take 71.6% of that 155.3% that you were at before you took that nosedive. It comes to 111.2%, so your investing was up 11.2%

Does that help? (I hope)

Saul

3 Likes

Does that help?

Hi Saul,

The method you use is a variation of what’s called “Time-Weighted Return”.
It’s useful for comparison to benchmarks and to give you an idea of how you’re
doing versus other investors.

However, if you add or withdraw funds during the year, then it can mislead you.
It may look good on your resume that you made an 11.2% return for the year, but
that’s not money you can take to the bank. If you have cash inflows and outflows,
and you want to see if you are meeting your investing goals, then you need to add
a second method – called “Money-Weighted Return”.

Both methods are useful. They are NOT mutually exclusive – they can be used
together to give an investor a more complete picture of how they are doing. If
you don’t add or withdraw funds from your account during the year, then using just
your method is fine.

Ears

9 Likes

Thanks everyone for the great discussion. I hope someone finds it half as interesting as I.

Cool, Saul, thanks. As many times as I’ve tried to work this out, for some reason that isn’t one of the solutions that came to me. I think (but don’t know) that most of the time this would be pretty accurate and for what little I do in investing, “good enough.” But I admit it bothers me a little that Ears is also correct, in that in certain circumstances involving large moves very early or very late in the period (especially a particular year) in question could blow the calculations out of the water.

If a little later you are at $18,000, you multiply 18,000 by .0061795 and you get 111.2, so you know that your investing is now up 11.2% for the year.

As I said, I don’t think this would be a problem for me, as I tend not to make that large a move and the chances of it being very early or very late in the year, while random, would be pretty small. Still, if it were to happen, I would not consider that a good year of investing since in reality, I lost money in that year. Bottom line, your solution could progably work well for me and I thank you.


Both methods are useful. They are NOT mutually exclusive – they can be used
together to give an investor a more complete picture of how they are doing.

Hi, Ears. Interesting, thanks! I didn’t know the names for the method. Guess I’ve tried to work these things out on my own rather than look them up in detail. So I have to ask: is their a formal way to combine the two (formulae, spreadsheet, etc.) or is it a “look at everything and eyeball the accumulated results?” Also, you didn’t mention what you use, or if you even bother. Would you mind sharing?


The Excel function XIRR will compute this for you.

Hi, Brian. Unless Ears says there is a formal way to combine the other methods, XIRR is the only way I’ve found to accurately calculate returns in a dynamic portfolio. The problem I have is the rigid formatting required (inflexible and requires negative entries for cash increases and positive for cash decreases, not exactly intuitive and hard to get accustomed to).

…I use it and it works well for me.

Great, you’re the first one I’ve ever heard that from who uses XIRR consistently. Have you found an automated way to make the entries from your broker, or do you enter each one manually?


I’m not obsessing over the methods. Measuring doesn’t change results, unless it’s used to adjust our strategy. It’s really about my first paragraph in the OP. Sometimes it seems like things are going nowhere when the big picture says the opposite, and vice versa. Compound returns are a powerful thing. How many people (non-investors) when asked what the annual gain would be of 12 consecutive months of 3% returns, would guess approx 3%*12= 36%, (a reasonable guess IMO) when in reality it is almost 42.6%, and that this little difference over a decade of investing $100k would be $1,306,441.74?

Thanks all, enjoy your last day off work before Mr. Market awakens. I wonder if he’ll be grumpy. Of course it matters not one bit, except that I have some shopping to do, so I hope he throws one of those famous tantrums. Big time. Maybe someone will tweet something dumb that will set him off. I have no idea who that someone could be or whom that someone might threaten with fire and awe. Unlikely? Maybe. But you have to admit, it’s not impossible. Not that I wish for such a thing. Seriously, no one is that stupid. So maybe just some little banking scandal would do the trick. But get real. I mean what are the odds of that happening?

Gotta go; Wells Fargo is on the phone … something about my mortgage accounts.

Dan

hey, wait a minute. She said “Accounts”. Plural.
But I only have one account.

7 Likes

Just noticed an error. First time ever. :slight_smile:

In the table:
From the Statements


**Month	Gain	CAGR/mo	CAGR YTD**
Jan	1.6%	21.1%	121.5%
Feb	1.4%	19.6%	120.5%
Mar	5.0%	78.2%	137.2%
Apr	-2.6%	-27.2%	117.3%
May	5.3%	82.9%	128.5%
Jun	3.5%	35.5%	132.1%
Jul	4.8%	49.5%	137.6%
Aug	27.7%	779.7%	190.9%

In the last-column formula I forgot to subtact 1 from gains, so all entries for Cumulative CAGR should drop the leading digit “1” as follows.


**Month	Gain	CAGR/mo	CAGR YTD**
Jan	1.6%	21.1%	21.5%
Feb	1.4%	19.6%	20.5%
Mar	5.0%	78.2%	37.2%
Apr	-2.6%	-27.2%	17.3%
May	5.3%	82.9%	28.5%
Jun	3.5%	35.5%	32.1%
Jul	4.8%	49.5%	37.6%
Aug	27.7%	779.7%	90.9%

Dan

1 Like

Hi Dan,

Chainsaws and miter saws are both saws, but they solve different problems. Same
with time-weighted and money-weighted – both measure returns, but solve different
problems.

If you want to compare your investing results to an index, or see how your
investing skill compares with other other investors, or display your investing
prowess on a resume to Goldman Sachs, then use time-weighted. (If you don’t add
or withdraw funds during the year, also use time-weighted. In this case, time-weighted
and money-weighted give the same answer).

If you add or withdraw funds during the year, and you want to see how your results
compare to your investing goals, or how your decisions about the timing of cash flows
impacted your results, then use money-weighted.


When I was actively investing, for money-weighted I download transactions from my broker
and used the XIRR function in Excel. Continuing my labored analogy, it took me some time
to learn how to use a miter saw, but after the learning curve it became indispensible. Same
with XIRR.

Hope this helps.

Ears

5 Likes

Hope this helps.

Hi Ears, Yes it does. I think I might have to bite the bullet and start using XIRR. I’ve played with it awhile back and it took me a while to learn the ins and outs to get it to work just right, but you’re correct, I think, that after a period of transition it should become second nature. Then I would never have to ask these questions again. :slight_smile:

When I was actively investing …

??? Oh no. You aren’t now? If you indicated that before I missed it, or forgot. What’s up?

Thanks,

Dan

The one problem with XIRR is that one has to enter every transaction, every dividend, every whatever. For some of us, that is not a problem since we want that detail, but for others, it is an onerous burden.

Also good is Radish’s (RIP) APY add-on for Excel. It has a lot of flexibility that XIRR doesn’t. I find it very stable, but then one has to accept that it is unlikely to now receive further maintenance.

The one problem with XIRR is that one has to enter every transaction, every dividend, every whatever.

You only need to enter cash flowing into or out of your account, not transactions like dividends and stock sales or purchases. These will just affect your overall cash value and will show in your returns that way.

George

2 Likes