4 Years In and Beating the Market

[no_free_lunch]

I have been on this site for just over 4 years now.  I thought I would have a quick look at returns since I started.

 

In my main account, it looks like my CAGR is 19% over the last 4 years.  This excludes bond allocations as I am trying to compare my stock picking return against an all ETF return, in either case I would have had a similar bond component.  It looks like my benchmark ETFs would have provided about 15% CAGR.  So 4% over benchmarks per year for the past 4 years.  This is with a portfolio of 15-20 stocks and occasionally large allocations to ETFs.  In the years 2004-2012 I returned about 2% over the benchmark so I have improved since then.

 

I haven't invested in a single stock that isn't written up on this site so thanks to everyone's help and feedback.

[Liberty]

Congrats, that's very good. Do you use leverage?

[no_free_lunch]

2008 was kind of crazy so absolutely no leverage.

[flesh]

2008 was kind of crazy so absolutely no leverage.

 

Are you looking only at equities as in roic on equities or are you including any cash you've held?

 

I've outperformed since 2012 while averaging 20% cash in my equity portfolio, therefore my roic is greater than my outperformance but that's a bit disingenuous imo, even if the story is only being told to myself.

[no_free_lunch]

I am not including the cash (well bonds) that I hold.  I think I was pretty upfront about that in my first post.  If you include the cash component, which is about 20% then I believe I am roughly even with the market.

 

However, what I am really trying to decide is if I held that 80% in an ETF, would I have done better than with the 80% in stocks.  No matter what I would have held 20% in bonds.  I am trying to figure out if I can get alpha and whether this entire stock selection process is worth pursuing.  I don't think that is disinegenious at all as long as I am not hiding my assumptions.

[KinAlberta]

I've commented elsewhere that anyone picking stocks should put half of the contributions into a decent index and continue to do so. Maybe into separate accounts to pay taxes on each out of each account. (I wish I had, even though I put a large sum early on into BRK._

 

If you can continue to do 20% a year on your stock picking, what do you care if half of your annual savings is just floating along in an index. Huge outperformance over the index will swamp the index funds in short order and you'll be so wealthy that the indexed funds will just be a relative drop in the bucket.

 

However, if you are like most stock pickers, over a few cycles, or say 10-15 years, you'll see exactly what your after tax returns are doing in comparison to your indexed funds. 

[flesh]

I am not including the cash (well bonds) that I hold.  I think I was pretty upfront about that in my first post.  If you include the cash component, which is about 20% then I believe I am roughly even with the market.

 

However, what I am really trying to decide is if I held that 80% in an ETF, would I have done better than with the 80% in stocks.  No matter what I would have held 20% in bonds.  I am trying to figure out if I can get alpha and whether this entire stock selection process is worth pursuing.  I don't think that is disinegenious at all as long as I am not hiding my assumptions.

 

Sorry, that came out wrong. I don't have bonds in my IB account. Only equities and cash.

 

I didn't presume and don't believe you were being disingenuous at all.

[no_free_lunch]

I've commented elsewhere that anyone picking stocks should put half of the contributions into a decent index and continue to do so. Maybe into separate accounts to pay taxes on each out of each account. (I wish I had, even though I put a large sum early on into BRK._

 

If you can continue to do 20% a year on your stock picking, what do you care if half of your annual savings is just floating along in an index. Huge outperformance over the index will swamp the index funds in short order and you'll be so wealthy that the indexed funds will just be a relative drop in the bucket.

 

However, if you are like most stock pickers, over a few cycles, or say 10-15 years, you'll see exactly what your after tax returns are doing in comparison to your indexed funds. 

 

Keep in mind, the index funds did 15% so I am not exactly killing it,  I am just in a bull market. :)  I am going to stay away from index funds because I just can't see them providing any kind of return, perhaps 1 or 2% over inflation.  If I can outperform that by even just 1% it will make a huge difference over my investing time frame.  I do have accounts where I have minimal control and those are in index funds so I do have some diversification if I mess up.

 

I do use ETFs when something gets to IV and I don't have another stock lined up.  Rather than rush I will put the money in an index fund until I find something else to buy.  At one point I couldn't find anything at all and I had 70% in index funds so that is not new to me but I try to avoid them if I can.