I think Denny makes an important point about you own financial needs. After all, if I was as rich as Rockefeller, to coin a phrase, I do not think my instructions would include ‘beat the index’! It might well be ‘beat inflation, but by no more than 2% and don’t lose my money’.
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Thanks for the clarification Ears. I have a better understanding now of what you were trying to say.
Saul
your annual return is the same but you have less to compound it with, don’t you? when you say you have a 351 or 352 bagger isn’t with respect to your original value of your portfolio in 1989?
that is not I understood the definition of ‘bagger’. Mine=end value/initial value -1
we are here to listen to the reasons and ideas and approaches … and not just of one person, but of the community which that person has attracted.
Great point tamhas, I have gotten an amazing number of ideas from others’ posts on this board!
Saul
when you say you have a 351 or 352 bagger isn’t with respect to your original value of your portfolio in 1989?
Hi again tj,
I guess the problem is that I never think in terms of baggers but just used the term for clarification earlier in this thread. I only actually think in terms of percentage gain of my investing, and never relate it back to any dollar value that I started with. So I guess what I meant as clarification turned out to muddy the waters. Sorry.
Saul
10bagger or 11 bagger, I think I would be quite happy either way
I’ve been corrected by my wife that has told me you can never have too many bags
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*I have posted it here before. In the last 10 years, Saul portfolio had trailed the indices pretty badly.*
I computed the annual returns for rolling 5, 10, 15, and 20 year periods, and the 24 year period
from the annual results reported in the Knowledgebase via the formula provide by earslookin:
**Year annual 5-yr 10-yr 15-yr 20-yr 24-yr**
1993 21.4%
1994 15.4%
1995 43.4%
1996 29.4%
1997 17.4% 25.0%
1998 4.9% 21.4%
1999 111.6% 37.0%
2000 19.4% 32.1%
2001 46.9% 35.5%
2002 19.7% 36.0% 30.4%
2003 124.5% 58.4% 38.7%
2004 16.7% 40.6% 38.8%
2005 15.6% 39.7% 35.9%
2006 8.6% 31.5% 33.5%
2007 22.5% 32.1% 34.1% 31.0%
2008 -62.5% -7.6% 21.0% 21.1%
2009 110.7% 4.0% 20.9% 26.1%
2010 0.3% 1.1% 18.8% 23.1%
2011 -14.5% -3.7% 12.6% 19.8%
2012 23.0% -3.6% 12.9% 20.1% 21.3%
2013 51.0% 27.4% 8.5% 23.1% 22.7%
2014 -9.8% 7.5% 5.7% 16.3% 21.2%
2015 16.0% 10.7% 5.8% 16.1% 19.9%
2016 2.5% 14.8% 5.2% 13.3% 18.5% 19.9%
**Year annual 5-yr 10-yr 15-yr 20-yr 24-yr**
Avg: 26.4% 22.0% 21.5% 21.0% 20.7% 19.9%
Last 10
yr Avg: 13.9% 8.3% 14.5% 21.0% 20.7% 19.9%
Saul's average Yearly Rate of Return (YROR) was 26.4% since 1993, but since 2007
it was "only" 13.9%. Similarly, the rolling 5 year YROR averaged 22% since 1997
and 8.3% since 2007. There haven't been enough years to go beyond that for the
15-year and 20-year YRORs, but the years we do have are quite close.
As Saul pointed out upthread, he's up an astounding (my take) 35,120% since 1989.
That works out to a 45% YROR. But take off the first four years (as is done for
the Knowledgebase article), and the YROR for the last 24 years is "only" 26.4%.
The YROR for the last 10 years is 13.9%.
I'm impressed by Saul's portfolio's performance, but looking at the rolling
averages in the table above shows that the raw numbers are less than they were.
And, it's probably worth noting that inflation has decreased since 1993 as well.
We could subtract out the rate of inflation from his YROR for each year and
re-run the calculations, which I suspect would be better (better to make 6% with
2% inflation then to make 10% with 7% inflation).
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2016 2.5% 14.8% 5.2% 13.3% 18.5% 19.9%
You have confirmed what I have said all along. Saul averaged 5.2% annual gain over the last 10 years and 19.9% over the last 24 years for which we have data.
In my previous post today, I’ve already addressed the reason why people who traded in the go-go 90’s have amazing numbers to brag about.
(1999 was my first year as an investor. I was pretty clueless. No problem. I made 100% gain that year. Those were crazy times.)
In the years 1995-1999 the market averaged 30% gain per year, 4 years in a row!!
1995 37.4%
1996 23.1%
1997 33.4%
1998 28.6%
That was the index of 500 stocks. If you picked 10-15 individual stocks, you could have done even better, as many did.
#6
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Year annual 5-yr 10-yr 15-yr 20-yr 24-yr
Avg: 26.4% 22.0% 21.5% 21.0% 20.7% 19.9%
Last 10
yr Avg: 13.9% 8.3% 14.5% 21.0% 20.7% 19.9%
Saul’s average Yearly Rate of Return (YROR) was 26.4% since 1993
That metric you call YROR is just going to confuse people. You are taking an arithmetic mean of a sequence of numbers where in fact what you really need is a geometric mean. That lead you to the wrong conclusion that Saul had averaged 26.4% annually instead of the actual 19.9%.
I’m not gonna bore you with the mathematical nuances of arithmetic vs geometric mean. There is more information here…
https://en.wikipedia.org/wiki/Inequality_of_arithmetic_and_g…
It is a known trick of mutual funds to advertise their arithmetic mean instead of the geometric mean. It makes their performance numbers look much better.
#6
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I’ve been corrected by my wife that has told me you can never have too many bags
Maybe not on Lufthansa but try British Airways or Ryanair and you have a severe penalty for too many bags! Don’t know about American carriers.
Ant
You are taking an arithmetic mean of a sequence of numbers where in fact what you really need is a geometric mean.
Yes, I took the average, not the geometric mean. Thanks for pointing that out.
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WE’VE NOW GOT OVER 50 POSTS ON THIS THREAD AND HAVE GOTTEN TO WHERE WE ARE OBSESSING OVER DETAILS, AND TO WHERE THE THREAD IS OF DOUBTFUL FURTHER USE TO MEMBERS OF THE BOARD IN TERMS OF PICKING GOOD INVESTMENTS.
Yes, I know, I started the thread and added to it, but it’s come to the end of its usefulness (if it ever had any).
LET’S DROP IT AND GET BACK TO DISCUSSING STOCKS.
Thanks very much for your understanding,
Saul
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When an investor has even, repeatable performance over a long time, you only need one number to describe their success. It is the average annual returns. End of story. No need for complicated tables.
Saul does not fit into this category. His performance was extremely uneven and entirely front-loaded. Most of the success “mass” is concentrated in the first half of his 24 year record (to borrow a phrase from physics.)
To give an accurate view of Saul’s portfolio success you really need two numbers.
- Average return in the first 12 years
- Average return in the last 12 years
This board chooses to shine a strong light on the first number and conveniently ignore the second.
With hundreds of intelligent people going through this board, three years and 25,000 posts, am I the only one that noticed the elephant in the room? This is shocking.
#6
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Hi #6
With hundreds of intelligent people going through this board, three years and 25,000 posts, am I the only one that noticed the elephant in the room? This is shocking.
It is Saul’s board and he has his method of investing that has worked well for him AND HAS (I ASSUME) PAID ALL HIS BILLS SO FAR. He doesn’t have to keep beating the averages to pay his bills, because his bills are paid already. If he continues to beat the “Averages” like in his first 12 years all he does is increase his tax bill to his new partners (The FED and STATE) You reach the next higher tax bracket and they get even more. Then they raise your Medicare deduction which in effect lowers your SS payments. (In my case in 2016 My wife and my payments were reduced about $3000–In 2017 SS was reduced another $9000 in 2017) and of course with a higher Adjusted Gross Income Line 37 on your 1040 you will probably won’t qualify for the normal deductions because you won’t meet the minimums. As you get older you will have to take larger RMD’s out of your IRA’s
Some months ago there were conversations here about portfolios and I had posted my portfolio and results I had achieved and how I built it. It created a fair amount of interest at the time and then it was decided that it was off topic and the board should get back to Saul Stocks–Which it did.
My question #6 is Does anyone know how people are doing portfolio wise to prepare for the future and retirement, because when the time comes to retire, they will have to retire whether the DJ is 50,000 or 5,000 and they better have a portfolio income stream to replace the weekly paycheck income stream.
b&w
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It is Saul’s board and he has his method of investing that has worked well for him AND HAS (I ASSUME) PAID ALL HIS BILLS SO FAR.
Sure. No problem. Saul belongs to a group of investors that won the lottery in the 1990’s and riding that jackpot all the way into the present and future.
He doesn’t have to keep beating the averages to pay his bills, because his bills are paid already.
Yes and no. He is doing fine on 5%-6% a year, which is what he averaged over the last 10 years. However, if you are going to make the claim that 25% annual gains are pretty easy, then you are going to have to back this up here and now, by handily beating the index. He has done it in the last 10 weeks, but not in the last 10 years.
That “25% Promise” is financial porn. Selling a seductive fantasy that you too can build fantastic wealth in a very short time. The people on this board are very smart but they are still falling for it. Human nature.
If he continues to beat the “Averages” like in his first 12 years all he does is increase his tax bill to his new partners (The FED and STATE) You reach the next higher tax bracket and they get even more.
Surely you are not suggesting that he is “tanking” on purpose to avoid the tax bill?
Some months ago there were conversations here about portfolios and I had posted my portfolio and results I had achieved and how I built it. It created a fair amount of interest at the time and then it was decided that it was off topic and the board should get back to Saul Stocks–Which it did.
I find your posts interesting and refreshing. I think the board should discuss whatever they find interesting without threads being shut down. I read the board in a threaded fashion and simply skip the stuff I don’t care about.
I very rarely post here or anywhere else. I only jump in when I see claims that lack serious evidence, misleading to new investors or flat out mathematically wrong.
#6
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Surely you are not suggesting that he is “tanking” on purpose to avoid the tax bill?
No, I’m not suggesting that he is tanking for any reason.
I can tell you that I built my portfolio by paying attention to my portfolio. I never compared my portfolio to the averages or indexes to see who was beating who. I had to be invested in the market and had to make money because I had no one else to ask to give me any. I didn’t have the option of going into cash because it looked like we were going into a recession and I could wait to invest when things looked rosier. I would have had to eat into capital. I was aware that bad times caused the averages to go down and that took my portfolio down with it, but I kept plugging away, the best I could to get through the rough times as best I could. ----So far, I’m still here—And 14 years of bills and taxes have been paid all from my portfolio, and my wife and I are 14 years older
b&w
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There is a difference between having a right to free speech and having the courtesy to recognize when one’s host has said that the topic is unwelcome.
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There is a difference between having a right to free speech and having the courtesy to recognize when one’s host has said that the topic is unwelcome.
I respectfully disagree. You are making an assumption that there is a member here that is superior to others and gets to dictate when threads are over and what topic is legit. I reject that axiom. The members will decide when a thread is done.
#6
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It’s his “house”. Respect it.
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It’s his “house”. Respect it.
This is your perception and I respect your view. Mine is different, however. There is no owner to this group. There is no host and no guests. There are only members of the Motley Fool.
#6
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