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moneysense.ca, 16/09/09
Did your portfolio break even?
In a recent column, Jon Chevreau noted that despite a strong bounce back in stock prices, many stock markets still need to gain 40 percent to 60 percent from current levels to hit the previous peak. But, as the Sleepy Mini Portfolio’s experience showed, many investors have probably already recovered from the crash. That’s what I’m seeing in my personal portfolios, which are, on average, up roughly 20% from the previous peak in set August 2008 due to: (1) Rebalancing by selling some bonds and buying some stock (2) Reinvesting dividends, interest and income trust distributions and (3) Adding regular savings, RBC Direct Investing bonus, Employee Stock Purchase Plan profits etc. The additions to the portfolio amounted to 14% of the value of the portfolio at the end of August 2008. Even after netting out the book value of additions to the portfolio, the current value has surpassed the previous peak. Has your portfolio recovered from the crash yet?
moneysense.ca, 16/09/09
I haven’t done much rebalancing, but my RRSP portfolio is just 0.4% shy of its highs last year in May 2008. This is mostly due to a heavy weighting in the banks, which, you can see from their charts, have made an almost perfect “V” formation.
Mine broke even due to the averaging down into equities and away from fixed income… kind of like “value averaging” but less disciplined
Between regular contributions (which I ramped up after I moved to a cheaper apartment) and the market rally which followed my January 2009 rebalancing, I’m now equal to or higher than where I started in May 2008 when I first started self-directed investing. It was a wild ride but I am glad I didn’t flinch!
Well, I’ve got more invested now than before the peak, but a good bit of that would be from regular contributions made along the way.
My dollar-cost-averaging approach is still underwater though – market value lags book value by 7%.
I’m way up due to an aggressive rebalancing into Canadian banks in late February and the fact that I avoided most of the carnage in late 2008 on sheer luck (I’m a new investor and was switching brokerages; I didn’t realize you could do an in-kind transfer of my RRSPs and sold the stocks to move the money). There were some nail biting weeks when the markets immediately went up and down 20% in late Feb/early March, but I held down. I rebalanced just last week to a more broad index fund approach.
With regular contributions since the peak of the buble, market value is about 7% above book value.
CC, can you give an example of how you calculated “netting out the book value of additions to the portfolio”? That would be helpful to those of us dollar cost averaging when trying to calculate performance.
@Brian: Let’s say our portfolios had a market value of $100 at the end of August 2008. Today, the market value is $120 due to additions, reinvestments, rebalancing etc. Of that $20, I had added $14 of savings during the year. If I net out the $14 in savings added my portfolios are roughly 6% more than their all-time highs. Does this make sense?
I’m up about 4% on the pre-crash level. Most of my equity is in Vanguard ETFs, so the decline of the USD has dampened my returns. I’m comfortable with this currency exposure, though, as I’m in it for the long haul.
I am off 3% as of yesterday, when I just happened to do the calculations in a spare moment…but that was according to last month’s statement on one account only. Needless to say I am a happy camper no matter what.
I believe it could be argued that everyone’s portfolio would have broken even if sufficient cash had been infused. The terms you are using really only have value if no additional funds were added, and only re-balancing were to occur. To those who have maintained their portfolio value without cash infusions, congratulations.
DAvid
I agree with DAvid here – ‘recovery’ should not include new contributions. My portfolio is up a few percent, but of course this includes SIGNIFICANT RSP contributions for 08 AND 09.
Without new contributions – my portfolio is still easily down 10-15% from pre-Aug 08 levels. (a couple of really big stinkers – Re: GE and Oilexco)
@DAvid, Sampson: Fair enough. If I had $100 in stock in Aug. 2008 and I added $70 over the year, it won’t be surprising at all that I’m ahead today even if the market is 50% off the peak. That’s why I think netting out the book value of the additions over the year provides a more useful picture. It shows how a sharp rally during the year has boosted the value of the additions and helped the portfolio recover quicker. It would be an interesting exercise to start out with XIU and XSB, rebalance during the year according to some formula (say when allocations are 5% off target) and check to see which portfolios have recovered. I’ll do that in a future post.
Overall, I’m still down 10-15% from August 08. I didn’t rebalance at all over the last 12 months. I’ve just been keeping steady with my monthly RRSP contributions (which have barely averaged me down). I’ve only been investing for 4 years so I still have a long ways to go.
@CC: thanks for clearing that up!
I am still rather sceptical of the current V shaped recovery. It truly seems to be based on expectations alone. Analysts last quarter predicted abysmal results so it’s no wonder that most stocks beat projections. Now that forecasts have been raised it is much more likely that you will see companies missing targets. Further, many of the companies only beat forecasts last quarter because they laid-off a huge amount of their workforces. With less people making the products or selling the products sales will be lower. Current valuations have P/Es that suggest we are back to business as usual. Please think before you consider the implications. With less workers to produce the production is not what it was a year ago.
Mine recovered a few days ago. This is truly amazing given the severity of the crisis but not unexpected. History tells us that markets recovered after every crisis in NA so back in October I new that there will be a recovery. What is trylu amazing is to what extent recovery happened. This is once in a recent history market bounce back.
I am still down about 12% since I started investing in Jan 2007. Unfortunately I was unemployed this year until last week, so I wasn’t able to put any new savings into the market lows. Now I need to build back up my savings reserve before I can start saving again for my investments. (So much for dollar cost averaging.)
One good thing I did was to move my investments into my RRSP this summer. It has allowed me to squeeze more stocks into less contribution room, so at least I was able to get some advantage from the recent lows in stock prices.
It depends upon how you measure return. If you only look at the share price and ignore distributions, then I’m still down by double-digits, almost 20%. If you include the distributions I’ve collected over the years, then I’m around breakeven.
I’m 6.5% over July 2008 value. After the crash I just continuted my regular contributions to my sleepy portfolio and shifted my fixed income allocation down as the market declined. Easy as 123.
[...] Capitalist asks if your portfolio has broken even? The media often focuses on how far off the stock indexes are from their highs which isn’t a [...]
I too am up from the previous peak, although I sold off all my bonds, infused every last dime I could and thought of getting a line of credit on the value of the house to throw in the market ( didn’t b/c if I lost our house my wife would kill me). I’d say I acted like a desperate gambler trying to win his losings back. It help me realize now the importance of bonds/fixed income.