Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
--- Example: Our portfolio consists of healthcare related only equity ( FSPHX and PRHSX )to the tune of 35% of the total portfolio value. If we report a YTD of +24%, this would only reflect the two equity holdings. NOW, to report to you the total return YTD including the 65% in the Fidelity Money Market of SPAXX (default money market for Fidelity); we would have a total return YTD of about 8.4%. Sidenote: SPAXX has a 7 day yield of about .71%, YTD = .26% and an E.R. of .45%.
While we have viewed/used M* portfolio manager to look at holdings for other data; we do simple math on the weekend to discover our real + or - for all of our invested holdings. After 15 or 20 minutes maximum, we know the total $ value of the current week, to measure against the previous week and also measure against the dollar value at the beginning of the year. Presto-magico........ done, done; discovering the YTD percentage gain. For the above example; and if a friend asked for our YTD, I would have to report a total gain of 8.4%; being the "real" number. Lastly, our personal invested portfolio has a total real money market cash holding of .09%.
Agree that old_skeet's return #'s are confusing though I don't believe he is trying to mislead because he has stated this fact before. But I don't always remember that fact unless someone brings it up.
But I will say that, for example, if he has 20% of his portfolio in cash (just a guess), then the over-all returns are closer to 9.8 x .80, or around 7.8% return YTD. That is less than the Lipper benchmark of course and that is assuming cash is generating zero % return.
We all probably use different benchmarks for monitoring our progress. I tend to use the TRP target date funds since they are so well diversified. With that comparison, their 50:50 portfolio mix fund, TRRUX, is up 9.1% YTD. I've actually found the target date funds fairly hard to consistently beat FWIW.
@Old_Skeet, I believe one way to get around M* not using cash in it's total return data would be to use an actual money market mutual fund. I use VMTXX when inputting my cash amount. It will calculate the mutual fund return along with all other funds.
Thanks for making comment on the subject of how to report cash. For information purposes I include CDs as a cash holding, plus there are two savings accounts, along with a health savings account and on top of that there are interest bearing accounts contained within my portfolios held with the broker.
From what I am understanding @Junkster wants all this "cash" factored in with the performance of my invested mutual funds. However, for more clean reporting Morningstar's Portfolio Manager does not recognize my manual cash entries in portfolio manager with respect to performance reporting although they do acknowledge it for computing the portfolio's total value. Remember, my overall portfolio includes several retirement accounts, a couple savings accounts, a health savings account and a CD ladder plus a couple interest bearing accounts. With this, Morningstar only reports the performance of the mutual funds themselves. This is ok with me because it give me an "apples to apples" comparison of how my assembly of mutual funds compares with a fifty/fifty index portfolio of only two mutual funds and the Lipper Balanced Index which is an assembly of 30 balanced mutual funds maintained by Lipper. Overall, Instant Xray scores my portfolio at about 50% equity.
I am so sorry ... there are some that are having difficulty with the Morningstar's Portfolio Manger performance numbers for the funds that I own. However, I believe this information to be accurate and it does provide meaningful information to me.
I will say it one last time and be done with it. He who speaks in the third person misrepresents his returns. Take a gander at catch22 post. What is so hard to grasp about that. What is so hard about looking at beginning of year balance and YTD balance to find your *actual* return? Of course if there are withdrawals/additions that has to be accounted for. But it is very misleading to exclude cash when figuring returns!!! But I guess if you want to bogusly enhance your returns because you believe you have some superior investment methodology then go right ahead.and exclude cash.
Just returned from my town dump... which holds a "cash" account that automatically replenishes itself when I get "down in the dumps". I carry this cash account around in my car on a transponder reader. Oh, and it's right next to my Sun Pass and EZ Pass transponders that also require that I carry cash balance on the accounts for toll charges.
While I'm reaching into my wallet often for folding money I at times pull out cash substitutes in the form of gift cards and promotional VISA cash cards.
Shhhhish...
I'm headed out right now to get some cash back that I was pre-charged for all those returnable sodas, beers, and waters containers.
Mostly beer.
@bee: Nothing like spending $$ to help crawl out of the dumps. Your incisive remarks prompt me to make some additional disclosures in the interest of completeness.
Full Disclosure: We've got two decent looking Morgan Silver Dollars displayed at home plus a couple original rolls of Susan B. Anthony dollars stashed away. I also own a couple copper-clad Eisenhower dollars which are sealed in plastic cases autographed by Louis Rukeyser. Guess he mailed them out to subscribers to his newsletter back than. (I generally carry one for good luck.) And I hang on to one musty old $100 bill that I stash inside a shoe when visiting NY or other destinations - just in case I ever need it. Stocked up on Chivas recently when the price fell by $5. So I'll gladly list that good fortune as a highly liquid asset. Finally, we get 10-cents for every empty beer can we return back to the retailer. However, the actual value of that last one waxes and wanes considerably over the course of a month.
For the record: I've never included any of these liquid assets & cash when tabulating investment returns before. In fact, I've never even thought of doing so until today's discussion.
Speaking in the "first person", I can easily see both sides of this discussion. If investment returns are to be compared, one against another, then cash should probably be included.
If you are only interested in comparing your current return to your return in some other time frame, then it really doesn't matter as long as you are consistent in your approach. We are older, have very good retirement income, and therefore keep what some would consider a ridiculous amount of cash in accounts with minimal income but hopefully some degree of safety. I don't count that cash as part of the "investment portfolio", since I'm more interested in the performance of my "active" investments.
If I do move some of that passive cash into the "investment side", then of course it's going to invalidate any comparison against some other portfolio, perhaps maintained on more strict accounting rules. FWIW, I actually keep two separate comparisons: one is strictly investments, no significant cash. The other is all financial assets, including cash, but excluding the SF home. The latter comparison is always going to be affected by current income from SS & pensions, as well as all expenses. This of course can't be directly compared to anyone else's setup, but it works very well for us, and has for some fifty years.
I appreciate all comments even form those that raised issues.
After some thought I plan to continue to report investment performance as derived from Moringstar Portfolio Manager. There are a couple reasons for this. One, it is how Morningstar Portfolio Manager computes my assemble of funds (portfolio). Two, it makes it easy to compare how my assembly of funds owned compares to a balanced assembly of only two index funds (stock & bond). And, three, it also makes it is easy to compare my assembly of funds owned to the Lipper Balanced Index which consists of thirty balanced funds assembled by Lipper. This makes it an apples-to-apples (funds assembled vs. funds assembled) comparison. As to my writing in the third person. Get use to it.
With this, there are no doubt some that will have issue with the above ... this is ok by me ... but, please know it is not likely to change.
@Old_Joe, I think you described pretty well what I do. At 63 I'm still working, so I don't need to hold cash to live on. So monitoring my "investment money" really, for me, is my 401k and IRA combined. I have cash in a money market for rainy day purposes, an HSA, a checking account... all in cash, but that is not investment.
But if your "investment portfolios" hold cash (passive cash as you called it) as a volatility buffer or to be used for buying opportunities (which I do both), that to me has to be part of your overall portfolio return.
As I said before, which I don't think skeeter picked up on, it is not hard to add your investment portfolio "cash" to a M* instant xray portfolio and see it calculated as part of total return. You need only use a "proxy" fund like the Vanguard MM fund VMRXX to represent your cash. Don't use CASH$ to represent cash in a M* portfolio.
I like the discussion and to-each-there-own when determining how well there investments are doing, but I'm with you. If your investment holdings include cash, cash should be included in total return. Just my 2cents.
Yes, I saw what Old_Joe wrote and here is what I discovered in the past when using a money market ticker symbol as a proxy for cash. And, why I don't use it.
In the past I have used AFAXX as a proxy for cash. Actually, my external cash represents about 16% of the 20% I have allocated to cash within my asset allocation. This computes 16% external cash and 4% mutual fund cash holdings by Xray for a total cash holding within my asset allocation of 20%. Taking Old_Joes' proxy VMRXX which Xrays at 82% cash, 16% bonds and 2% other. So when a proxy is used in the amount of external cash I hold this somewhat distorts the overall asset allocation. To see how this effects ones asset allocation yourself take your portfolio value and multiply it by 16%. Then add a cash proxy for this amount using the ticker symbol VMRXX in Xray (and Portfolio Manager) along with your other holdings. Then change the symbol to Morningstar's recommended cash proxy (for external cash) which is "CASH$". In me using Old_Joe's proxy actually lowered my cash allocation and raise my bond allocation and other assets within the overall allocation in Xray. With this I am still with using Morningstar's recommended cash ticker symbol in Portfolio Manager and in Xray which is "CASH$" for all external cash held.
Now to get an apples to apples comparison for my mutual funds owned vs the Lipper Index and a 50/50 portfolio of Index funds I remove my external cash; and, when removed this leaves me at about 58% equity in Xray. This 58% equity is still within the equity range of what is allowable for a balanced fund.
And, there you have it Old_Skeet has not been out to spoof anyone. In fact I made mention of this in previous post as to how I computed and reported using Morningstar's Portfolio Manager to derive at my investment returns. Seems, at least one remembered. But, it was not until Junkster exploded and started a movement directed towards Old_Skeet that I had been misrepresenting my performance due to the removal of external cash. And this has now become a widely discussed subject on the board. Please know the external cash entry "CASH$" was was in Portfolio Manager and fully allocated for and it is Morningstar's Portfolio Manager program itself that ignored it. It simply does not recognize external cash positions.
So, to see this for yourself open a portfolio in Portfolio Manager and add your holdings and amounts held. Then add an entry for external cash using their cash symbol "CASH$' and an amount which represents 16% more than the value of your portfolio. Now, look at the performance numbers ... Seems, they did not change did they? But, notice the valuation of the portfolio increased by the amount of the external cash entry in Portfolio Manager.
Now do the same in Instant Xray. Notice how your overall asset allocation changes with the entry of external cash.
Plain and Simple ... It's the Morningstar program ... and, not Old_Skeet's ways of looking at things you folks need to have your gnaw towards if you want external cash recognized in Morningstar performance reporting. Remember, my portfolio is comprised of a few accounts and I use portfolio manage to combine them into one.
I remain ... with my current posture. And, that is to remove external cash to get an apples-to-apples comparison as to how my assembly of funds matches up against a 50/50 index portfolio as well as the Lipper Balanced Index. Please note none of the standards, I used, hold any external cash. For me, this provides me with the information I seek as to how my funds selections (which by themselves) Xray out as a balanced portfolio match up against two widely used standards.
Thank you for your many thoughtful contributions and for addressing the questions that have been directed your way.
I enjoy your thoughts whenever you post. Sometimes I agree with your analysis and sometimes not. Mostly, I appreciate that, like myself, you find many aspects of the financial markets highly interesting, and also, like myself, you appear to have a clearly though out plan for investing. We're not alone in that. Most here I'd say fit the above description.
Where I differ is that I don't find regular monitoring of returns of much value or interest to me. That's especially true if one is substantially invested in equities or some of the riskier segments of the bond market. Most advisors suggest anywhere from a 3-year to a 10-year time horizon if one is substantially invested in equities. So I don't understand the reason for highlighting your short term returns. However, I defend your right to do so as long as the methodology employed is explained (which you've clearly done).
My calculation method, learned in 8th grade math is simple - probably absurdly so. Our teacher taught us to "divide the bigger number into the smaller one" to get a percentage. Example: You start the year with $10,000 and end the year with $15,000. Your investment increased by $5,000 during the year. Dividing $5,000 by $10,000 yields a gain of 50%. Once a year on December 31 I perform this basic calculation and than dutifully record that data for future reference. If you want to include the effects of compounding over longer periods there are readily available online tools for doing so.
I don't mean to suggest that my simple method above is superior to yours, which employs M* reporting on various funds. But I do mean to suggest that keeping track is a pretty simple matter and that it need not be done weekly or monthly. Once a year works fine for me - and given the constraints imposed by the inherent volatility of equities - is probably of more benefit to longer term investors.
Personally, I have great records (data sets) for the decade that existed between the making of contributions and the taking of distributions. Once I entered the withdrawal stage, the calculations became more difficult (and probably a bit less accurate). However, adjustments can be factored in, and once-a-year tabulations still provide reasonably decent feedback on how the investments performed. Again - I'd like to stress that such yearly "snapshots" are just that. And, they're not particulatily relevant to truly long term investors.
One area where some of us may benefit from nearer term reporting is in observing the performance of different market sectors. This information might provide early warnings of potentially overbought sectors along with timely hints of where pockets of value may exist. If I could change one thing regarding the board's content it would be to de-emphasize attention paid to short term portfolio and fund performance and to place additional emphasis on observing the performance of different market sectors.
PS: I don't care which voice you choose to write in. We all have different styles.
Good points Hank. I agree with you on this reporting of short term results and will abstain from it in the future. That is what got me riled up in the first place. The thread begins about who saw red in their account and then the egomaniac somehow uses it to highlight his performance. A performance which when including cash is mediocre at best over the years. Mediocre because of being overly diversified holding 50 funds which borders on the absurd. But I agree with whatever works best and how investing is an individualistic process and all. But do we have to hear about it ad neuseum as if it's something special.
Don't confuse (1) observing daily performance of various funds and sectors with (2) short-term monitoring/reporting of portfolio return.
I watch daily activity strictly for educational value. If interest rates spike a half-percent on a given day, how do "fund A" / "fund B" react? When the President threatens fire & fury on some small nation, how do metals, energy, or equities respond? (BTY: I think this was the spirit in which @Derf posted his original query.)
I work very hard (as I know you do) to dampen volatility in my overall portfolio - being two decades into retirement. Monitoring daily volatility provides valuable feedback - though it rarely prompts action. To me it's all interesting information - harmless unless you react to it ... food for thought ... interesting conversation for some. But nothing to get excited about - and, more to the point, nothing to hang your hat on.
Just one more complaint @Junkster - I miss your more frequent contributions. But I imagine you happily hiking some miountain trail.
Time to take a bike ride. Rain moving in in a few hours.
Don't confuse (1) observing daily performance of various funds and sectors with (2) short-term monitoring/reporting of portfolio return.
I watch daily activity strictly for educational value. For example: If interest rates spiked a half-percent that day, how did "fund A" vs "fund B" react? When the President threatens fire & fury on some small nation, how do metals, energy, or equities respond? (BTY: I think this was the spirit in which @Derf posted his original query.)
I work very hard (as I know you do) to dampen volatility in my overall portfolio - being two decades into retirement. Monitoring daily volatility provides valuable feedback - though it rarely prompts action. To me it's all interesting information - harmless unless you react to it . Food for thought. Interesting conversation for some. But nothing to get excited about - and, more to the point, nothing to hang your hat on.
Just one more complaint @Junkster - I miss your more frequent contributions. But I imagine you happily hiking some miountain trail.
Regards
Thanks Hank, "happily hiking some mountain". I wish. That's what precipitated my recent outbursts. Meaning I am in rhe NC mountains but the past couple days have been sidelined with rains and clouds where you can't see in front of you. So I sit here with my IPad and take it out on Old Skeet. My bad. Plus one of my recent bond recommendations - IOFIX - seems to have become a groupthink fund over at Morningstar where I now sometimes post. They read this forum! So besides no more short term results which is meaningless anyway, no more mentioning of funds either. So not much for me to offer anymore.
"A California appellate court said book-jacket blurbs that make verifiably false claims are not entitled to free-speech protections in the state. The case centers on the remarkable claims of financial success--specifically the 23.4 percent annual return the folksy amateurs supposedly earned on their investments over a decade ..."
Let's hope the courts don't apply that book-jacket rule to discussion boards.
Here is another thought ... if external cash is to be included then so should profits (or losses) made from sold securities and performance of other securities held outside of the mutual funds in computing portfolio returns. What I have been writing about is Old_Skeet's mutual funds performance vs. a 50/50 index portfolio vs. the Lipper Balance Index. So how does one include performance and profits made from sold securities and spread it among the mutual funds?
Something to think on. What say you?
From my perspective I've done it the cleanest way possible as external cash and profit (or loss) made within other parts of the portfolio in not way effect the performance of the funds.
Not sure this is responsive, but if you bundle everything you hold using that yodlee engine offered at Fidelity (FullView) and ML (My Financial Picture), and I bet there is identical at other firms, you can easily see total change. If you make differently filtered portfolios, you can parse and segment that change any handy way you wish. (As I reduce my number of holdings in retirement, I remain astonished that PONDX is up 6.6% ytd, with PDI incredibly beating DSEEX 19.6% to 15.1% ytd.)
Comments
So, is my math "close" with this?
--- Example:
Our portfolio consists of healthcare related only equity ( FSPHX and PRHSX )to the tune of 35% of the total portfolio value.
If we report a YTD of +24%, this would only reflect the two equity holdings.
NOW, to report to you the total return YTD including the 65% in the Fidelity Money Market of SPAXX (default money market for Fidelity); we would have a total return YTD of about 8.4%.
Sidenote: SPAXX has a 7 day yield of about .71%, YTD = .26% and an E.R. of .45%.
While we have viewed/used M* portfolio manager to look at holdings for other data; we do simple math on the weekend to discover our real + or - for all of our invested holdings.
After 15 or 20 minutes maximum, we know the total $ value of the current week, to measure against the previous week and also measure against the dollar value at the beginning of the year. Presto-magico........ done, done; discovering the YTD percentage gain.
For the above example; and if a friend asked for our YTD, I would have to report a total gain of 8.4%; being the "real" number.
Lastly, our personal invested portfolio has a total real money market cash holding of .09%.
Respectfully,
Catch
But I will say that, for example, if he has 20% of his portfolio in cash (just a guess), then the over-all returns are closer to 9.8 x .80, or around 7.8% return YTD. That is less than the Lipper benchmark of course and that is assuming cash is generating zero % return.
We all probably use different benchmarks for monitoring our progress. I tend to use the TRP target date funds since they are so well diversified. With that comparison, their 50:50 portfolio mix fund, TRRUX, is up 9.1% YTD. I've actually found the target date funds fairly hard to consistently beat FWIW.
@Old_Skeet, I believe one way to get around M* not using cash in it's total return data would be to use an actual money market mutual fund. I use VMTXX when inputting my cash amount. It will calculate the mutual fund return along with all other funds.
Thanks for making comment on the subject of how to report cash. For information purposes I include CDs as a cash holding, plus there are two savings accounts, along with a health savings account and on top of that there are interest bearing accounts contained within my portfolios held with the broker.
From what I am understanding @Junkster wants all this "cash" factored in with the performance of my invested mutual funds. However, for more clean reporting Morningstar's Portfolio Manager does not recognize my manual cash entries in portfolio manager with respect to performance reporting although they do acknowledge it for computing the portfolio's total value. Remember, my overall portfolio includes several retirement accounts, a couple savings accounts, a health savings account and a CD ladder plus a couple interest bearing accounts. With this, Morningstar only reports the performance of the mutual funds themselves. This is ok with me because it give me an "apples to apples" comparison of how my assembly of mutual funds compares with a fifty/fifty index portfolio of only two mutual funds and the Lipper Balanced Index which is an assembly of 30 balanced mutual funds maintained by Lipper. Overall, Instant Xray scores my portfolio at about 50% equity.
I am so sorry ... there are some that are having difficulty with the Morningstar's Portfolio Manger performance numbers for the funds that I own. However, I believe this information to be accurate and it does provide meaningful information to me.
You will never make everyone happy!
And, so-it-goes.
@bee: Nothing like spending $$ to help crawl out of the dumps. Your incisive remarks prompt me to make some additional disclosures in the interest of completeness.
Full Disclosure: We've got two decent looking Morgan Silver Dollars displayed at home plus a couple original rolls of Susan B. Anthony dollars stashed away. I also own a couple copper-clad Eisenhower dollars which are sealed in plastic cases autographed by Louis Rukeyser. Guess he mailed them out to subscribers to his newsletter back than. (I generally carry one for good luck.) And I hang on to one musty old $100 bill that I stash inside a shoe when visiting NY or other destinations - just in case I ever need it. Stocked up on Chivas recently when the price fell by $5. So I'll gladly list that good fortune as a highly liquid asset. Finally, we get 10-cents for every empty beer can we return back to the retailer. However, the actual value of that last one waxes and wanes considerably over the course of a month.
For the record: I've never included any of these liquid assets & cash when tabulating investment returns before. In fact, I've never even thought of doing so until today's discussion.
If you are only interested in comparing your current return to your return in some other time frame, then it really doesn't matter as long as you are consistent in your approach. We are older, have very good retirement income, and therefore keep what some would consider a ridiculous amount of cash in accounts with minimal income but hopefully some degree of safety. I don't count that cash as part of the "investment portfolio", since I'm more interested in the performance of my "active" investments.
If I do move some of that passive cash into the "investment side", then of course it's going to invalidate any comparison against some other portfolio, perhaps maintained on more strict accounting rules. FWIW, I actually keep two separate comparisons: one is strictly investments, no significant cash. The other is all financial assets, including cash, but excluding the SF home. The latter comparison is always going to be affected by current income from SS & pensions, as well as all expenses. This of course can't be directly compared to anyone else's setup, but it works very well for us, and has for some fifty years.
I appreciate all comments even form those that raised issues.
After some thought I plan to continue to report investment performance as derived from Moringstar Portfolio Manager. There are a couple reasons for this. One, it is how Morningstar Portfolio Manager computes my assemble of funds (portfolio). Two, it makes it easy to compare how my assembly of funds owned compares to a balanced assembly of only two index funds (stock & bond). And, three, it also makes it is easy to compare my assembly of funds owned to the Lipper Balanced Index which consists of thirty balanced funds assembled by Lipper. This makes it an apples-to-apples (funds assembled vs. funds assembled) comparison. As to my writing in the third person. Get use to it.
With this, there are no doubt some that will have issue with the above ... this is ok by me ... but, please know it is not likely to change.
Old_Skeet
But if your "investment portfolios" hold cash (passive cash as you called it) as a volatility buffer or to be used for buying opportunities (which I do both), that to me has to be part of your overall portfolio return.
As I said before, which I don't think skeeter picked up on, it is not hard to add your investment portfolio "cash" to a M* instant xray portfolio and see it calculated as part of total return. You need only use a "proxy" fund like the Vanguard MM fund VMRXX to represent your cash. Don't use CASH$ to represent cash in a M* portfolio.
I like the discussion and to-each-there-own when determining how well there investments are doing, but I'm with you. If your investment holdings include cash, cash should be included in total return. Just my 2cents.
Derf
Yes, I saw what Old_Joe wrote and here is what I discovered in the past when using a money market ticker symbol as a proxy for cash. And, why I don't use it.
In the past I have used AFAXX as a proxy for cash. Actually, my external cash represents about 16% of the 20% I have allocated to cash within my asset allocation. This computes 16% external cash and 4% mutual fund cash holdings by Xray for a total cash holding within my asset allocation of 20%. Taking Old_Joes' proxy VMRXX which Xrays at 82% cash, 16% bonds and 2% other. So when a proxy is used in the amount of external cash I hold this somewhat distorts the overall asset allocation. To see how this effects ones asset allocation yourself take your portfolio value and multiply it by 16%. Then add a cash proxy for this amount using the ticker symbol VMRXX in Xray (and Portfolio Manager) along with your other holdings. Then change the symbol to Morningstar's recommended cash proxy (for external cash) which is "CASH$". In me using Old_Joe's proxy actually lowered my cash allocation and raise my bond allocation and other assets within the overall allocation in Xray. With this I am still with using Morningstar's recommended cash ticker symbol in Portfolio Manager and in Xray which is "CASH$" for all external cash held.
Now to get an apples to apples comparison for my mutual funds owned vs the Lipper Index and a 50/50 portfolio of Index funds I remove my external cash; and, when removed this leaves me at about 58% equity in Xray. This 58% equity is still within the equity range of what is allowable for a balanced fund.
And, there you have it Old_Skeet has not been out to spoof anyone. In fact I made mention of this in previous post as to how I computed and reported using Morningstar's Portfolio Manager to derive at my investment returns. Seems, at least one remembered. But, it was not until Junkster exploded and started a movement directed towards Old_Skeet that I had been misrepresenting my performance due to the removal of external cash. And this has now become a widely discussed subject on the board. Please know the external cash entry "CASH$" was was in Portfolio Manager and fully allocated for and it is Morningstar's Portfolio Manager program itself that ignored it. It simply does not recognize external cash positions.
So, to see this for yourself open a portfolio in Portfolio Manager and add your holdings and amounts held. Then add an entry for external cash using their cash symbol "CASH$' and an amount which represents 16% more than the value of your portfolio. Now, look at the performance numbers ... Seems, they did not change did they? But, notice the valuation of the portfolio increased by the amount of the external cash entry in Portfolio Manager.
Now do the same in Instant Xray. Notice how your overall asset allocation changes with the entry of external cash.
Plain and Simple ... It's the Morningstar program ... and, not Old_Skeet's ways of looking at things you folks need to have your gnaw towards if you want external cash recognized in Morningstar performance reporting. Remember, my portfolio is comprised of a few accounts and I use portfolio manage to combine them into one.
I remain ... with my current posture. And, that is to remove external cash to get an apples-to-apples comparison as to how my assembly of funds matches up against a 50/50 index portfolio as well as the Lipper Balanced Index. Please note none of the standards, I used, hold any external cash. For me, this provides me with the information I seek as to how my funds selections (which by themselves) Xray out as a balanced portfolio match up against two widely used standards.
Nothing more ... nothing less.
Gnaw .....
Thank you for your many thoughtful contributions and for addressing the questions that have been directed your way.
I enjoy your thoughts whenever you post. Sometimes I agree with your analysis and sometimes not. Mostly, I appreciate that, like myself, you find many aspects of the financial markets highly interesting, and also, like myself, you appear to have a clearly though out plan for investing. We're not alone in that. Most here I'd say fit the above description.
Where I differ is that I don't find regular monitoring of returns of much value or interest to me. That's especially true if one is substantially invested in equities or some of the riskier segments of the bond market. Most advisors suggest anywhere from a 3-year to a 10-year time horizon if one is substantially invested in equities. So I don't understand the reason for highlighting your short term returns. However, I defend your right to do so as long as the methodology employed is explained (which you've clearly done).
My calculation method, learned in 8th grade math is simple - probably absurdly so. Our teacher taught us to "divide the bigger number into the smaller one" to get a percentage. Example: You start the year with $10,000 and end the year with $15,000. Your investment increased by $5,000 during the year. Dividing $5,000 by $10,000 yields a gain of 50%. Once a year on December 31 I perform this basic calculation and than dutifully record that data for future reference. If you want to include the effects of compounding over longer periods there are readily available online tools for doing so.
I don't mean to suggest that my simple method above is superior to yours, which employs M* reporting on various funds. But I do mean to suggest that keeping track is a pretty simple matter and that it need not be done weekly or monthly. Once a year works fine for me - and given the constraints imposed by the inherent volatility of equities - is probably of more benefit to longer term investors.
Personally, I have great records (data sets) for the decade that existed between the making of contributions and the taking of distributions. Once I entered the withdrawal stage, the calculations became more difficult (and probably a bit less accurate). However, adjustments can be factored in, and once-a-year tabulations still provide reasonably decent feedback on how the investments performed. Again - I'd like to stress that such yearly "snapshots" are just that. And, they're not particulatily relevant to truly long term investors.
One area where some of us may benefit from nearer term reporting is in observing the performance of different market sectors. This information might provide early warnings of potentially overbought sectors along with timely hints of where pockets of value may exist. If I could change one thing regarding the board's content it would be to de-emphasize attention paid to short term portfolio and fund performance and to place additional emphasis on observing the performance of different market sectors.
PS: I don't care which voice you choose to write in. We all have different styles.
Regards
Thanks (I think).
Don't confuse (1) observing daily performance of various funds and sectors with (2) short-term monitoring/reporting of portfolio return.
I watch daily activity strictly for educational value. If interest rates spike a half-percent on a given day, how do "fund A" / "fund B" react? When the President threatens fire & fury on some small nation, how do metals, energy, or equities respond? (BTY: I think this was the spirit in which @Derf posted his original query.)
I work very hard (as I know you do) to dampen volatility in my overall portfolio - being two decades into retirement. Monitoring daily volatility provides valuable feedback - though it rarely prompts action. To me it's all interesting information - harmless unless you react to it ... food for thought ... interesting conversation for some. But nothing to get excited about - and, more to the point, nothing to hang your hat on.
Just one more complaint @Junkster - I miss your more frequent contributions. But I imagine you happily hiking some miountain trail.
Time to take a bike ride. Rain moving in in a few hours.
Regards
"A California appellate court said book-jacket blurbs that make verifiably false claims are not entitled to free-speech protections in the state. The case centers on the remarkable claims of financial success--specifically the 23.4 percent annual return the folksy amateurs supposedly earned on their investments over a decade ..."
Let's hope the courts don't apply that book-jacket rule to discussion boards.
Something to think on. What say you?
From my perspective I've done it the cleanest way possible as external cash and profit (or loss) made within other parts of the portfolio in not way effect the performance of the funds.