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Total Return vs other performance measures?

A helpful place to also put any annual reports etc, of your own portfolios
Itsallaguess
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Re: Total Return vs other performance measures?

#433590

Postby Itsallaguess » August 9th, 2021, 9:12 pm

mc2fool wrote:
Ok, so [Pyad] does still trumpet that, despite capital being secondary, HYP1 has thoroughly trounced the FTSE 100 then! :D


Well, I'm all done on my 'defending HYP1' quota for today, but I would like to think it's obvious from the words that Pyad has clearly written regarding the primary focus of his strategy, and that they discount the HYP strategy as one that's claiming to deliver 'improved total return' as part of it's mission, and is clearly one that's primarily focussed on delivering income only, but anyone thinking Pyad won't go looking to pick up unrelated bonus-points on these types of reports hasn't been paying much attention to his style over the years! :O)

mc2fool wrote:
Getting back to any Lemon Fool income-investor who clearly proclaims that their strategy also delivers better total-returns, I believe TJH falls into that category.

He has stated in the past that the reason for his high(er) yield strategy is that he noticed in his early investing days that his higher yield investments (UTs at the time IIRC) actually had better capital gains than the lower yield ones.

He has the evidence too.


I agree that's one of the reasons that Terry has steered his own approach into the really quite regulated income-strategy that he has, with it's long-term, rule-based approach to income-portfolio management, but I'm not clear on your final point - are you saying that he's got the evidence that his approach works, and delivers on that premise over the long term?

Cheers,

Itsallaguess

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Re: Total Return vs other performance measures?

#433593

Postby CryptoPlankton » August 9th, 2021, 9:48 pm

I'm afraid I'm quite a simple soul and I'm really not sure what it is I should be measuring?! Perhaps, if I explain my circumstances, someone could explain how I should go about it and then maybe I could start to form an opinion on this curious question of whether Total Return should be the "be all and end all of measurement".

My life is currently funded by rental income (taxable), withdrawals from a SIPP (taxable) and dividends from two Stocks and Shares ISAs. Obviously, the rent comes from a property which has a variable (but, hopefully with time, increasing) value. The SIPP is largely invested in a global tracker and two "wealth-preserving" Investment Trusts with the value having increased over the past twelve months net of the amount drawn down. The "excess" dividends in the ISAs are reinvested and both of these have increased in value net of the dividends withdrawn. I have a third ISA dedicated to more "growth" oriented stocks, which acts as a growing safety net. Next year, I will start to receive a small Civil Service pension from my brief time served many years ago. My State Pension won't kick in for another few years.

Of course I keep an eye on things, but I don't really measure performance as such - as long as it all ticks along and the income seems sustainable (by whatever combination of means) then I'm not quite sure how "Total Return" is relevant? If somebody would like to explain how to go about "measuring my Total Return" then I may consider giving it a go out of curiosity, but, quite honestly, I struggle to see the point - all I'm bothered about is ensuring my ability to continue generating the income I require...

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Re: Total Return vs other performance measures?

#433594

Postby Newroad » August 9th, 2021, 9:50 pm

In fairness, ItsAllAGuess.

There may be quite a few people who have "trounced" the FTSE100 over certain timeframes, in particular recent ones. So, that particular statement may well be on the money. For example, a quick glance at one of my three portfolios (the ISA) had I held it since inception (earliest possible date is June 2019, due to holding VAGP) would have it up over 20% (on a with reinvestment, offer to bid basis).

Other indexes or benchmarks might have proven more difficult to "trounce". For example, in that same period, the ISA would be down a little more than 5% versus an all world tracker ETF such as VWRL.

Regards, Newroad

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Re: Total Return vs other performance measures?

#433595

Postby Darka » August 9th, 2021, 10:11 pm

I just measure my income, if it's sufficient then I am happy.

Can't be bothered with any other measurements and have zero interest in unitising, XIRR, or anything else.
I could easily do those things, but I chose not to as I'd rather get on with enjoying life and leave the investments (mostly) to take care of themselves.

I do however prefer investment trusts (income and some growth) but also have a small HYP - to me, it's all a single portfolio.

This never ending argument does get really tiresome and I don't see the point of it - everyone can do as they please, no need to criticise others or prove that your technique is better.

It's not a competition..... :roll:

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Re: Total Return vs other performance measures?

#433597

Postby tjh290633 » August 9th, 2021, 10:44 pm

Itsallaguess wrote:The simple challenge I've put forward during these types of discussions in the past is to ask for any example of a Lemon Fool income-investor who clearly proclaims that their strategy also delivers the best total-returns...

If none can be found, then I think the clear assumption should be that income-investors generally belong to Group B, unless specifically otherwise stated....

I refer you to viewtopic.php?p=433504#p433504 where I suggest that you compare the TR versions of the FTSE350HY and FTSE350LY indices.

TJH

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Re: Total Return vs other performance measures?

#433603

Postby Newroad » August 9th, 2021, 11:33 pm

Hi TJH.

Is there something specific about the FTSE350 which makes it the best point of reference? Whether there is or not, does your methodology in effect attempt to match the FTSE350HY somehow, or does it simply provide the universe you pick from (or something else)?

Whatever the answers to the above, see below the ISA, the worst of my three similarly constructed portfolio's over the timeframe I can show them (denominated as "My Portfolio" and constrained by the inception of VAGP) overlaid on the various FTSE350 indices - with reinvestment, offer to bid.

Image

My ISA, which has decent performance but is nothing special (as discussed earlier, it's around 5% lower than a simple VWRL) outperforms all of them.

Here's a longer chart (10 years)

Image

"My Portfolio" here is the "Vanguard FTSE U.K. All Share Index Unit Trust - Accumulation".

Over both timeframes and with both comparisons, LY appears to outperform HY? For the avoidance of doubt, I'm not suggesting LY must always be better either, just exploring various assertions. My apology in advance if I'm somehow not fairly reflecting FTSE350HY and FTSE350LY as suggested.

Regards, Newroad

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Re: Total Return vs other performance measures?

#433605

Postby mc2fool » August 10th, 2021, 12:33 am

Newroad wrote:I'd like to see the case made in a somewhat scientific way.

Sounds like you want to get yourself a large mug of tea/coffee and read the 2011 edition of the Credit Suisse Global Investment Returns Yearbook.

"The Credit Suisse Global Investment Returns Yearbook 2011 provides 111 years of data on financial market returns in 19 countries, from 1900 to date, making it the definitive record on long run market returns..."

In particular the article "The quest for yield", pages 15-23.

"This article examine whether income, per se, should matter. It shows the contribution of income and dividend growth to long-term returns. It investigates the performance and risks of strategies tilted towards higher yield, both within and across equity markets."

Download link: https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-yearbook-2011.pdf

If you like that one there's other CS Global Investment Returns Yearbooks at https://www.credit-suisse.com/about-us/en/reports-research/studies-publications.html

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Re: Total Return vs other performance measures?

#433606

Postby mc2fool » August 10th, 2021, 12:39 am

tjh290633 wrote:
Itsallaguess wrote:The simple challenge I've put forward during these types of discussions in the past is to ask for any example of a Lemon Fool income-investor who clearly proclaims that their strategy also delivers the best total-returns...

If none can be found, then I think the clear assumption should be that income-investors generally belong to Group B, unless specifically otherwise stated....

I refer you to viewtopic.php?p=433504#p433504 where I suggest that you compare the TR versions of the FTSE350HY and FTSE350LY indices.

TJH, hasn't your own HY investing beat the FTSE 100 TR? I thought you'd posted unitised figures sometime in the past that showed it did, or am I misremembering?

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Re: Total Return vs other performance measures?

#433608

Postby 1nvest » August 10th, 2021, 1:52 am

mc2fool wrote:
tjh290633 wrote:
Itsallaguess wrote:The simple challenge I've put forward during these types of discussions in the past is to ask for any example of a Lemon Fool income-investor who clearly proclaims that their strategy also delivers the best total-returns...

If none can be found, then I think the clear assumption should be that income-investors generally belong to Group B, unless specifically otherwise stated....

I refer you to viewtopic.php?p=433504#p433504 where I suggest that you compare the TR versions of the FTSE350HY and FTSE350LY indices.

TJH, hasn't your own HY investing beat the FTSE 100 TR? I thought you'd posted unitised figures sometime in the past that showed it did, or am I misremembering?

2000 to 2020 inclusive and the FTAS total gross return excluding costs has 'rewarded' less than 2% annualised real (after inflation). Even a simple 10 year gilt ladder has beaten that. Or you could have bought a 2.3% inflation linked bond back then and have earned more. A yearly rebalanced third each UK T-Bills, US stock, gold yielded 5.2% annualised real.

To some extent whilst there were the pull-down dot-com bubble burst, financial crisis, brexit, covid events, it was the financial crisis that hit the FT100 hard, decked it and its stayed down. Recall someone on TMF who was really heavily into Lloyds, a bet the farm type confidence - whose portfolio/wealth was devastated by the 2008/9 financial crisis.

Quite similar to Japan 1990's to some extent. Their 1980's boom when the likes of Yamaha, Sony ..etc. rose to be giants and saw Japan rising to be 50% of global market cap, knocking the US down from 70% to 25% type world weighting. When that slowed and their market faltered/fell (US rebounded to be 50% of world) those giants still remained dominant of the index, drag factors, but where in the FT100's case its been banking stocks that have been the drag factor.

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Re: Total Return vs other performance measures?

#433626

Postby tjh290633 » August 10th, 2021, 8:44 am

mc2fool wrote:
tjh290633 wrote:
Itsallaguess wrote:The simple challenge I've put forward during these types of discussions in the past is to ask for any example of a Lemon Fool income-investor who clearly proclaims that their strategy also delivers the best total-returns...

If none can be found, then I think the clear assumption should be that income-investors generally belong to Group B, unless specifically otherwise stated....

I refer you to viewtopic.php?p=433504#p433504 where I suggest that you compare the TR versions of the FTSE350HY and FTSE350LY indices.

TJH, hasn't your own HY investing beat the FTSE 100 TR? I thought you'd posted unitised figures sometime in the past that showed it did, or am I misremembering?

It has, although I don't keep much of a record against the TR index, just the simple UKX, which I compare with my income unit price.

Newroad's post above viewtopic.php?p=433603#p433603
shows how in the recent past the HY and LY indices swapped places. As was suggested, I choose shares from the HY350 index I have to pick a new entrant to replace one lost by takeover or very low yield.

I'm quite happy for you lot to argue amongst yourselves. Fixed interest ruled itself out for me when I retired in 1998, because yields were lower than equities with no prospect of growing income. It has never been in contention since.

,TJH

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Re: Total Return vs other performance measures?

#433644

Postby Lootman » August 10th, 2021, 10:39 am

tjh290633 wrote:
mc2fool wrote:
tjh290633 wrote:I refer you to viewtopic.php?p=433504#p433504 where I suggest that you compare the TR versions of the FTSE350HY and FTSE350LY indices.

TJH, hasn't your own HY investing beat the FTSE 100 TR? I thought you'd posted unitised figures sometime in the past that showed it did, or am I misremembering?

It has, although I don't keep much of a record against the TR index, just the simple UKX, which I compare with my income unit price.

The problem is that the FTSE-100 has been a dismal performer for decades now. Comparing one's performance against it can make you think you are an investment genius when in reality if you had any global exposure then, due to the huge gains in US and China markets, you will have "murdered" the FTSE-100, and also "murdered" probably any HYP out there.

If we are going to have the total return debate at all, and I am agnostic on that for the most part, then at least use a world index as a benchmark. If you didn't have a decent exposure to US markets in the last 25 years, you almost definitely will have woefully under-performed a global index whilst also taking on more risk.

The UK equity market is something like 4% to 5% of global market cap. You can figure the UK HY universe of shares is about half of that.

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Re: Total Return vs other performance measures?

#433650

Postby Newroad » August 10th, 2021, 11:10 am

Hi Lootman.

I pretty much completely agree with your post above - i.e. FTSE100 under-performer and therefore possibly giving rise to illusory relative performance and therefore, if anything, pick a global benchmark for comparison, e.g. one of the MSCI, FTSE or whatever world indexes.

{Hi TJH} I don't know about "recent past" - the second graph was a 10 year one. But in any case, here are a couple of longer term ones

FTSE350LY starting at around 2357* on 01/10/1997 now 4763.95, i.e. around +202%

Image

FTSE350HY starting at around 2319* on 01/11/1997 now 3217.01, i.e. +139%

Image

So, that would indicate 25 years or so, at least, of relative underperformance, if I've understood it correctly.

Interesting to see the different peaks and higher volatility of the FTSE350HY - I wouldn't have necessarily expected that - suggesting there were brief periods within of outperformance. Looks like the long term performance would have been closer pre-COVID, but the FTSE350HY seemingly never breached 4000 whereas the FTSE350LY was around 4500 late 2019.

Regards, Newroad

* hard to get exact from the graph - needed to put the mouse over it - but hopefully usefully indicative

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Re: Total Return vs other performance measures?

#433654

Postby 88V8 » August 10th, 2021, 11:22 am

Alaric wrote:
Itsallaguess wrote:Income - This is the purpose of HYP..

How should that statement be interpreted? Does it mean that an outcome which delivers income of 10 and capital value of 90 is to be preferred to one that delivers income of 5 and capital value of 100?

For a pure income investor with no heirs to consider, yes.
(Leaving aside possible tax considerations anent CGT allowance and dividend tax.)
In terms of total return, it's worse of course.
But as a pure income investor I don't really care.

Not to say that TR doesn't matter and a TR strategy isn't a worthy pursuit and meriting of discussion, it just doesn't matter to me, and imho will have little worth and not much merit if ever we get into a bear.

V8

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Re: Total Return vs other performance measures?

#433661

Postby GoSeigen » August 10th, 2021, 11:30 am

Newroad wrote:FTSE350LY starting at around 2357* on 01/10/1997 now 4763.95, i.e. around +202%

[...]

FTSE350HY starting at around 2319* on 01/11/1997 now 3217.01, i.e. +139%

[...]

So, that would indicate 25 years or so, at least, of relative underperformance, if I've understood it correctly.


What about dividends?

GS

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Re: Total Return vs other performance measures?

#433663

Postby Newroad » August 10th, 2021, 11:37 am

Hi GoSeigen.

They were taken into account in the earlier graphs (as I selected With Reinvestment) but I couldn't do that with those from Investing.com, so I haven't. If you know a source where I can get the length of time and have dividends explicitly factored in, I'd be happy to reproduce.

Fair question though - might, at the margins, be enough to put the pre-Covid performance closer. As always, apologies in advance for any errors.

Regards, Newroad

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Re: Total Return vs other performance measures?

#433684

Postby 1nvest » August 10th, 2021, 12:26 pm

Portfoliovisualiser is US data based so in US$'s, however we can still use that as a guide to relative performances.

Funds I used for the comparisons ...

EWU : UK
VEU : World excluding US
VT : World
US benchmark (Vanguard S&P500)

Click (or right click and select open in new tab) the following image to access the portfoliovisualizer data/tables

Image

Data is limited by VT to being back from 2008/9

To me that suggests that the UK and world excluding US have been somewhat similar, US has done very well, world which is around 50% US has middle-lined between the two. With some drop off in the UK since Brexit.

They're all total returns lines, accumulation/dividends-reinvested.

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Re: Total Return vs other performance measures?

#433696

Postby mc2fool » August 10th, 2021, 1:05 pm

tjh290633 wrote:
mc2fool wrote:TJH, hasn't your own HY investing beat the FTSE 100 TR? I thought you'd posted unitised figures sometime in the past that showed it did, or am I misremembering?

It has, although I don't keep much of a record against the TR index, just the simple UKX, which I compare with my income unit price.

Ok, well as the yield on yours has always been greater than the FTSE 100s then it's obviously beat it TR wise too, but in any case, how about posting your income units vs UKX so that IIAG and NR can see. I'm sure that given your legendary record keeping and your long standing status on TMF/TLF that they'll be happy to take the figures on trust as evidence. :D

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Re: Total Return vs other performance measures?

#433704

Postby Newroad » August 10th, 2021, 1:36 pm

Hi Mc2Fool.

My apology for the belated reply to your earlier post - got distracted by work ;)

Thanks for the CreditSuisse recommendation - maybe something for my impending holiday. However, 2011 is a long time ago in terms of how the market has changed - as even are McClung's 2016 effort or Koesterich's 2018 effort re Portfolio Allocation that I have mentioned elsewhere. The world is a different place in the 2020's - and it will be hard to find a period, even back as far as 1900, which "rhymes" with it to try and draw lessons from.

Regards, Newroad

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Re: Total Return vs other performance measures?

#433712

Postby mc2fool » August 10th, 2021, 1:52 pm

Newroad wrote:I pretty much completely agree with your post above - i.e. FTSE100 under-performer and therefore possibly giving rise to illusory relative performance...

Pfft...a while back you said you'd be interested in someone demonstrating that it was possible to beat the market using a HY strategy and now someone is saying they have you're dismissing that saying "wrong market"? (Better than 1nvest I guess, who effectively said, "wrong asset class"!).

Sure the FTSE has been an under-performer relative to global indices, but that doesn't make beating it while investing only within it an "illusory relative performance", does it now ... of course, you can always dismiss any result by saying you could have done better elsewhere.

In regards to your using FTSE 350 HY/LY capital values, rather than TR, and "If you know a source where I can get the length of time and have dividends explicitly factored in, I'd be happy to reproduce", you already have it.

The "With reinvestment" Trustnet chart shows, in the last column of the table below it, the "Since Launch" figures. For the LY it's 1554.2% and for the HY it's 2559.2%. Both indices were launched at the same time (in 1993 IIRC), with both the capital indices and their TR parallels starting at 1000. Today, as you seem to like that site (although the charts only go back to 1999):

https://uk.investing.com/indices/ftse-350-low-yield-tr
https://uk.investing.com/indices/ftse-350-high-yield-tr

It is well known that over the loooong term "value" and "momentum" strategies tend to beat the overall market. High yield is a not-perfect proxy for "value" so rides along with it. However it is also well known that these (and other) strategies can and do under-perform for extended periods. Certainly "value" has under-performed since the global financial crises. Whether that means it's due for a return to favour, I wouldn't want to guess ... :D

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Re: Total Return vs other performance measures?

#433718

Postby mc2fool » August 10th, 2021, 2:00 pm

Newroad wrote:Thanks for the CreditSuisse recommendation - maybe something for my impending holiday. However, 2011 is a long time ago in terms of how the market has changed - as even are McClung's 2016 effort or Koesterich's 2018 effort re Portfolio Allocation that I have mentioned elsewhere. The world is a different place in the 2020's - and it will be hard to find a period, even back as far as 1900, which "rhymes" with it to try and draw lessons from.

LOL! :lol: Ok, so having posted lots of posts asking for historical evidence and posting historical charts, etc, that appear to support your preconception, you're now dismissing historical research on the basis that, what, it's different this time? :lol:

Maybe it is, I have no idea, but as nobody has any future evidence/research, I guess that's the end of this sub-thread, eh?....


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