How HYP1 might have grown with dividend reinvestment

[moorfield]

The beaty of logarithmic linear least squares is that it uses all the data points, unlike (say) CAGR, which just uses two. Geometric means are almost as poor, in my view, because they simply calculate the average growth rate that transforms the first data point into the last data point, thereby producing the same result as CAGR.

Yes I do agree. I used to have to do these years ago at university (calculator pencil and paper, no excel!), something I'll have to try and get back into.

[Arborbridge]

Amidst the panolpy of portfolio reviews I read here (that season starts again soon...) which tend to focus on capital gains or losses,

....Oh no they don't

'tis the season...

[moorfield]

In Memoriam Gengulphus. One of his greatest contributions here in my view, a simple and elegant model.
And let's not forget Malcolm's charts either.

"Accumulation" HYP1 income was £26,517 in year 22 with a total value of £394,911.

[MDW1954]

And let's not forget Malcolm's charts either.

Did I do a chart on a table like this? If so, I'll likely still have it, and can easily update it. Ask, and ye shall receive.

A link to a post, though, would make the task simpler... then I could quickly locate the spreadsheet in question.

MDW1954

[Itsallaguess]

And let's not forget Malcolm's charts either.

Did I do a chart on a table like this? If so, I'll likely still have it, and can easily update it. Ask, and ye shall receive.

A link to a post, though, would make the task simpler... then I could quickly locate the spreadsheet in question.

I strongly suspect it's these two charts Malcolm, from earlier in this very thread -

HYP1 Capital Value growth rate - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=28104#p467562

HYP1 Income growth rate - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=28104#p467610

Cheers,

Itsallaguess

[1nvest]

The beauty of logarithmic linear least squares is that it uses all the data points, unlike (say) CAGR, which just uses two. Geometric means are almost as poor, in my view, because they simply calculate the average growth rate that transforms the first data point into the last data point, thereby producing the same result as CAGR

I record HYP1 and FT250 total return data and comparing the two yielded a higher standard deviation in FT250 yearly values. De-scaling for the near 21 vs 14 stdev differences to instead hold 67/33 FT250/T-Bills and the standard deviations more aligned as did the linest(ln. Similar reward and standard deviations



For say a 4% DIY dividend yield (taken out of total return), with a 67% stock (FT250) = 2.7% proportioned, such that if fixed income were generating 1.3% / 0.33 = 3.9% interest you'd have the 4% overall portfolio 4% 'dividend yield'. A nice factor there is that income is more consistent/stable. You might draw a 4% SWR from stock consistently, as would the fixed income bonds you purchase also yield the interest consistently. Whilst broadly having the same degree of portfolio risk/reward.

As you say log linear least square is better than CAGR. R-squared can also be useful in indicating the degree of variance around that trendline. For the above for instance HYP1's r-squared was 0.94 versus 0.95 for the 67/33 i.e. the latter varied less around its trendline (marginally better risk-adjusted reward).

[MDW1954]

And let's not forget Malcolm's charts either.

Did I do a chart on a table like this? If so, I'll likely still have it, and can easily update it. Ask, and ye shall receive.

A link to a post, though, would make the task simpler... then I could quickly locate the spreadsheet in question.

I strongly suspect it's these two charts Malcolm, from earlier in this very thread -

HYP1 Capital Value growth rate - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=28104#p467562

HYP1 Income growth rate - https://www.lemonfool.co.uk/viewtopic.php?f=15&t=28104#p467610

Cheers,

Itsallaguess

Got it. I'm on it.

Malcolm

[MDW1954]

Here you go -- the income with dividend reinvestment column, updated with the latest 2022 income figure of £26,517. As you can see, the LLLS growth rate is slightly higher than last year's figure.

Malcolm

[moorfield]

"Accumulation" HYP1 income was £19,723 in year 23 with a total value of £391,464.

This thread is a great contribution made to LF imo, because it joins together disparate methods from Gengulphus and MDW1954 to create an incredibly simple yet powerful tool for HYPersavers 10,15,20 years out, say, from retirement, and for free.

[MDW1954]

I can update the LLLS chart if anyone would like me to...?

MDW1954

[moorfield]

I can update the LLLS chart if anyone would like me to...?

MDW1954

Sorry for the late reply Malcolm, yes please.

[1nvest]

"Accumulation" HYP1 income was £19,723 in year 23 with a total value of £391,464.

This thread is a great contribution made to LF imo, because it joins together disparate methods from Gengulphus and MDW1954 to create an incredibly simple yet powerful tool for HYPersavers 10,15,20 years out, say, from retirement, and for free.

From a quick calculation using your yearly value/income figures, I'm seeing a different total return.

Assuming reinvestment at the ongoing rate of return then each years gain is

( current value + income - prior years value ) / prior years value

For that the total return compounds to a 7.9% long linear regression, 0.942 r-squared, 7.54% annualised. Which is more than what your total return value indicates

Take the end of first year for example, 75414 value, 3451 income, 75000 prior years value and ( 75414 + 3451 - 75000 ) / 75000 = 0.0515 (5.15% total return), whereas your table suggests a 4.4846% total return for that year.

???

[moorfield]

From a quick calculation using your yearly value/income figures, I'm seeing a different total return.

Assuming reinvestment at the ongoing rate of return then each years gain is

( current value + income - prior years value ) / prior years value

For that the total return compounds to a 7.9% long linear regression, 0.942 r-squared, 7.54% annualised. Which is more than what your total return value indicates

Take the end of first year for example, 75414 value, 3451 income, 75000 prior years value and ( 75414 + 3451 - 75000 ) / 75000 = 0.0515 (5.15% total return), whereas your table suggests a 4.4846% total return for that year.

???

Gengulphus has factored in a trading cost here, so at the end of year 1 the first reinvestment of income increases every holding by a factor of:

(75414 + 0.98 * 3451) / 75414 = 1.044846

The top post of this thread works through it all rather thoroughly.

[1nvest]

From a quick calculation using your yearly value/income figures, I'm seeing a different total return.

Assuming reinvestment at the ongoing rate of return then each years gain is

( current value + income - prior years value ) / prior years value

For that the total return compounds to a 7.9% long linear regression, 0.942 r-squared, 7.54% annualised. Which is more than what your total return value indicates

Take the end of first year for example, 75414 value, 3451 income, 75000 prior years value and ( 75414 + 3451 - 75000 ) / 75000 = 0.0515 (5.15% total return), whereas your table suggests a 4.4846% total return for that year.

???

Gengulphus has factored in a trading cost here, so at the end of year 1 the first reinvestment of income increases every holding by a factor of:

(75414 + 0.98 * 3451) / 75414 = 1.044846

The top post of this thread works through it all rather thoroughly.

Thanks. Missed that as the top post is set as a ignored poster for me.