Entries Tagged 'Fund Performance' ↓

The fund continues to be perform strongly. Five out of six positions are outperforming the ASX200 index with only the ANZ marginally underperforming. The fund is currently in the green and I am looking at investment possibilities. If I do not make the time to invest in individual assets over the coming week I will invest some of the cash into an index fund.

Investing is a time consuming activity. If you don’t have both the time and considerable interest to analyse individual investments then index funds should be your vehicle of choice.

I just returned from ten days holiday in New Zealand. Before leaving I placed a trailing stop order on the 1,000 ANZ shares the Fund bought in mid July. The stop was set at 5% below the recent high of $19.52. Continue reading →

I’ve updated the Fusion Fund spreadsheet with the ANZ purchase.

OK looking picture after three months. The out-performance will slow, but with the power of fusion the gap will widen over time. Past performance is said to be not indicative of future performance. Disclaimer rant, you know the drill.

Do I think we’ll see 4,000? Nope. Do I think we’ll see the equivalent of 4,000 corrected for long-term market growth? I don’t know, but it seems likely that we will eventually see the equivalent of such a low point. John TwinDeltaTandem

Wow…so clear when someone like John lays it out. Kaboom the path is clear. Investing at low points is an easy path to market out-performance. Using margin at low points is the accelerant.

This thread on the BMW Method Board at TMF shows a remarkable dire consensus. I feel compelled to remark that on the few occasions predictions come true they are usually short lived.

I am slightly in cash. Around 10%. The FI portfolio is 79% cash and buying. If you’re finding reasons not to buy in the current market and though bought confidently in the last two years then you are taking a difficult path to investment success.

If we wash dramatically lower from here then I’ll start to use margin. That is the time to use margin safely. Unfortunately most people us margin in bull markets. To some extent they are right, you want to be in margin and looking to pare back that margin during the early phases of a bull market. You just don’t want to get caught on margin any were in sight of a market peak.

If you are in cash now, well down! You’ve done better than me on this ride down, my cash got to around 20%. I did choose cash instead of an index fund when starting the portfolio as that was clearly the best position to be in. All it takes is a few right calls down the years while keeping the mis-steps as small as possible.

Beware the negative consensus.

Buy on Fear.

Tune out the noise, what do you know is right.

I wonder what the rest of the thread offers. I like most of the suggestions thus far:

1. Be a cheap and recoverable lesson that he will never forget. qazulight
2. Most of what Dan said was probably true, but hey smell the roses the entire world stinks of power and greed. The pigs are at the troths.
3. “When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished by how much he’d learned in seven years.” Mark Twain lptj suggestions on the mechanics of how to deal with SS18 was good
4. I like Wendy’s suggestion
   Tell him to put half into an online savings account at Countrywide, which yields 3.35%.
   Tell him to put the other half into BAC, which currently yields 11.8%.

Interesting re-reading the first part the consensus is not so dire after all. Only a couple gloomy posts. Most seem balanced and wise.

The FI Fund is 18.68% up on the ASX200.

Cheers
Dean

After three months investing in a bearish market the FI Fund has finally succumbed and slipped into the negative territory. I have updated the spreadsheet and PDF file and you can see them on the portfolio page.

The following graph highlights why I’m still feeling good about the performance thus far. The FI fund is kicking the leather off the index ball. Continue reading →

The Fusion Investing Fund continues to outperform its benchmark. Although two months is around five years short of a meaningful record it is nonetheless gratifying to be outperforming. The only position entered this month was a Fedex June $90 Put.

Current positions have an average 9.9% outperformance. Cash included, the total outperformance is 4.8%.
The fund is looking closely at whether to establish long positions in Pfizer (PFE) and General Electric (GE) and continues to monitor Australian Banks.

The fund continues to hold a significant cash balance and will continue to invest this as opportunities arise.

For details see the Fusion Investing Fund Portfolio

Benchmarking a portfolio and calculating returns are both contentious issues in reporting the performance of a share portfolio.
The most common method of benchmarking is to compare fund or portfolio returns to an appropriate share index. Fortunately in Australia there are only a few indexes to choose between. The primary Australian ASX Indices http://au.finance.yahoo.com/indices range from the total market All Ordinaries, AORD, down through the S&P ASX 20, 50, 100, 200, 300 to the S&P ASX MidCap 50 and S&P ASX Small Ordinaries.

For a true benchmark of your performance an Accumulation Index is the correct measure. Albeit flattering, using one of the core indexes would be simply deceiving.

If you invest in Australian shares, the most common benchmark in the ASX200 Accumulation or as it is now known the S&P ASX200 Total Return Index. Standard and Poor’s took over management of the ASX indices in 2001. S&P produced and the ASX published the ASX200 Accumulation Index, XJOAI, until publication was discontinued in December 2005.

If you primarily invest in small caps then the S&P ASX Small Ordinaries Total Return Index is the appropriate index to compare your performance with.

Unfortunately since S&P stopped publication of the Accumulation Index there is no easily obtainable free source of historical data. It is possible to obtain daily data from the S&P web site as they explain in their Index FAQ.
“Where can I find Total Return/Accumulation Index on the Web site?
Go to the specific index that you are seeking and click the ‘Data’ tab. To the right-hand side of ‘TR’ and underneath ‘Level’ you will find the total return value for the date shown. To get historical data you just need to change the date, ensuring the correct date format is used. “

I have started extracting the data from the S&P website and will make it available for free. I’ll continue to update this Excel file, which also contains the S&P ASX 200 index. (AXJO)

What should an individual investor actually do?
Benchmarking against an index may be OK for fund managers, but for individual investors it makes little sense. We can’t invest directly in an index, so what there is no point in comparing ourselves to one. Individual investors should compare their portfolio performance to an investable asset which closely mirrors an appropriate index. Yup that right, I’m talking about an index fund or an ETF (Exchange Traded Fund).

Index Funds and ETFs
Two main choices in Australia, though others do exist:
Vanguard Index Australian Shares Fund” charges a management fee of 0.75% p.a. for the first $50,000, then 0.50% p.a. for the next $50,000 and 0.35% p.a. for the balance over $100,000. There is also a spread of .2% on purchase and .1% on withdrawal.

State Street SpidersETFs on the top 50 or
top 200.Management costs are 0.286% and there will be the bid/ask spread.

Index funds and ETFs are the most suitable choice for investors who do not have the time or interest for investing, but desire exposure to a particular asset. I believe Index funds and ETFs are the most suitable investment vehicle for most investors.

After I had written, but prior to posting I noticed the following new blog post on Rational Wealth Beat the Pros by Being a “Know-Nothing Investor”. I encourage you to read the blog article and I agree with every point except “Invest windfalls right away”. I’ll discuss that another day as I also received an email question as to why I had banked the uninvested portion of the Fusion Investing Portfolio instead of investing it in an index fund.

On a final note: I had meant to blog this last Friday, but was unfortunately knocked off my bicycle by a car and spent 22 hours in the Royal Melbourne Hospital with concussion and suspected spinal injury. Fortunately I will be OK with a visit or three to an osteopath, but I am unlikely to be writing consistently this week. The accident certainly made me all the more aware about how precious life is and how important it is not to waste time or opportunities.

Best to all
Dean

April 30 2008

FI Fund receives $3.17370 per Great Southern TREES2 (GTPGA) Security.
This total of $4,760.55 was directly deposited into the FI Funds model bank account.

Individual tracking
I now need to determine how best to track the total return of this security. I’m currently thinking about using an adjusted close basis. If anyone has a good suggestion please let me know.

Portfolio tracking
For my personal portfolio I use IRR . I need to determine if this is best for the FI Fund or if another calculation like TWR is most appropriate. Any input is welcome.
This thread on The Motley Fool Liquid Lounge contained this sage advice by EnochRoot. Although this is not directly applicable to the FI Fund at present I found this to be excellent advice for fund managers.

“Wholly appropriate IMO to include both TWR and IRR in your client correspondence. For marketing purposes though, TWR is really the only appropriate calculation to use.

Easiest way to explain the difference to clients who may be confused by two different numbers: “Mrs. Client, IRR is YOUR performance, TWR is MY performance.” The IRR, which incorporates cashflow timing into the return calculation, most accurately shows how the account itself performed. However, since the client controls the timing of cash flow into and out of the account, not the money manager, it would be inappropriate for the manager to take credit for the benefit (or detriment) of the timing of those flows (I am assuming you don’t have the right to call capital into the fund like a VC/PE fund would.) TWR strips away cash flow and simply calculates the performance of the money manager’s actions alone, making it more appropriate measurement with which to judge how well the manager himself is performing (thus making it the only appropriate measuring tool for marketing purposes). “

I will endeavour to determine the best method before updating the FI Fund’s one month performance, which is surprisingly due tomorrow.

Cheers
Dean