Hi, a newbie question here.
I know from the Knowledge Base that Saul calculates his returns himself because of the need to continually withdraw cash.
At this point in my life I’m only putting cash in, and would like to use SA’s Scorecard feature to give me a running view of my returns. But my current XIRR shows at 13%, and my annualized rate is 5%. Which of these (or a different one) most closely reflects Saul’s method of calculating returns? Could anyone offer thoughts on which benchmark they pay attention to on the scorecard, if any?
Thanks for any and all advice!
The XIRR is the time-weighted internal rate of return on your investments. Investments held a long time will count more than those held for a few weeks. It is intended to be as close to an annualized rate of return as possible for a portfolio that is constantly adding cash and new positions.
The S&P500 return column shows you what the same dollars invested at the same time in the S&P500 index would have returned you. Thus, comparing your XIRR to the S&P500 is a valid benchmark for knowing if you are “beating the market”.
The “XIRR vs S&P” column is thus your “alpha” – how much you are beating (or losing to) the index.
Lastly, the “Total Returns” column shows your total realized and unrealized gains/losses in aggregate for everything you enter into the portfolio.
Hope that helps!
Tiptree, Fool One guide
Why not use a small cap index instead of the S&P? Seems like that would be a closer comparison/benchmark?
Thanks, Tiptree. I was asking because I was hoping to use the scorecard to view my results for this year alone, since this is the way Saul reports his own results on this board, and I was curious to compare mine to that.
But the scorecard is a very useful tool for me.