Tag: t_cf500

blogposts related to benchmarking against SP500

2021 prognosis@ %%stock-pick`trec #cf mufu

Posted on by tiger40490

Let’s put on the white (or black) hat not the yellow hat or red hat. Let’s avoid “hope”.
— net capital invested .. “will be 10k at end of 2021”. Achieved.
— Number of names .. “will be 100 to 200”. Turned out to be 201 at 31 Dec 2021
Best way to count: Dec statement
— %bad_bets .. At an “average” time, in my rbh portfolio perhaps 40% of names (ETF included) would be in red, but 35% if considering dividend. Such a large difference exists because many of my non-performing stocks would have a tiny paper loss, easily compensated by dividend.

Quite likely 10% of the red or black names would have a %PnL below 1% [3]. These would be flippers ( flipping black/red ). Therefore I define deepRed as “%PnL worse than 1%”. Note, I don’t care about deepBlack. My batting average of “lucky picks” trec?  Dubious because

  1. 20% of the names can flip black/red over any period of time. This is similar to tracking your weight fluctuation on different scales, wearing different clothing … the measurement noise is way too high.
  2. div is ignored by Rbh

In conclusion, I will use a biased-yet-pragmatic yardstick “%bad_bets” := #deepRed_names / #names

[3] Quick assessment by mental calc? compare average cost vs current price, in the Rbh tabulation.

I forecast my %bad_bets would hit 25->30-40% (Achieved). So far, the typical %bad_bets hovers within 15~20%.

In Dec 2021 I told Aaron+Claris that I “always make money whenever I invest in stocks”. (My 3-min description was based on the blogpost on my eq returns.) I explained my eqMufu experience, revealing the key drawback of expRatio. Then I explained my stock picking track record. Most of my picks have be successes.

A “Success” means the stock didn’t drop “too badly”. It could be underwater now, but not hopelessly or permanently. It once had and will again have a chance to show a profit.

— DYOC trec .. “will be around 3->4-5% before tax over 2021”. Cost excludes withdraw-able cash. Achieved even though I have diversified to low-div stocks. If I use some arbitrary criteria to exclude the low-dividend stocks from my portfolio, then my “adjusted” DYOC would be 4->5-6%, before tax.

To manage DYOC, I can consider increasing position in existing high-yield stocks, while reducing (not wiping out) other positions.

My DYOC would be better than my peers, partly due to the prevalence of ETF passive investing. Any mufu salesman in a Singapore bank would ask me to compare my trec against a high-dividend mufu such as FSSA-DIVA. However, mufu often pays out part of its dividend from NAV when it receive less dividend than expected in a poor quarter. I explained in my blogpost on DPR.
— dividend income .. “will be 4% x 8k = $320/Y”, turned out to be $516 over 2021. (2020: $98)
— PnL trec (excluding div) relative [1] to SP500 .. would show a smaller difference (+/-), due to my focus on dividend. However, if there is a crash or long trough then I would benefit from my defensive portfolio, as I can receive dividends and keep my faith in the defensive, stable cash flows.

See also easy to make money; easy to lose
See also inDefenseOf MOETF + drawbacks #w1r4

Red-hat Warning : peer-comparison on PnL is counterproductive even harmful. It is as meaningless as (or worse than) comparison on brank, college prestige, size of home. Many people win that game (PnL or whatever) at a high cost like stress, distraction and family time.

[1] Absolute PnL prognosis will depend mostly on market return
— My tcost on babysitting … would remain “recreational”. Achieved.
My pre-trade tcost .. would increase from the Jan 2021 (honeymoon) level. I beat my expectation 👍.

(de)stressor in eq-investing #w1r4

Posted on by tiger40490

I guess for most equity investors, stress [like all-at-once stressor moments, distraction, sleep in peace,,,] is like an “occupational hazard”, a fact of life.

I practice mainly two forms of eq-investing AA) SP500_ETF, BB) recreational MOETF. All other forms of eq-investing are unfamiliar to me, and by default too risky in terms of “wildfire getting out of control”  .. such as those 3episodes@ non-recreational trading. It’s worthwhile reviewing stressful investing experiences.

Note the key benefits of AA and BB are unavailable in “my” other asset classes like FXO, leveraged FX, gold, bond mufu, Singapore ETF

== AA) mindless investing .. SP500_ETF (not other indices, not mufu) is one low-stress, buy-n-forget form of investing. What about $200k in it? Should be fine. Buy-n-forget SP500_ETF relies on the index committee as stock pickers. Other ETFs, like sector ETF or other countries’ ETF are usually less successful than SP500_ETF. (Note buy-n-forget a single stock doesn’t involve exit-timing. Can rarely beat SP500_ETF.)

How about “balanced” mufu? It is supposed to buy “stability” at the cost of return but in my experience it doesn’t reduce stress cf SP500_ETF. Actually I always maintain my own bond ptf + speculative ptf + …. I can rebalance them, something I can’t do with a balanced mutu. Also the expRatio is not worthwhile.

== BB) recreational MOETF .. a classic positive stress comparable to other analytical and active-learning pastimes, in tech, magazine-xx, healthy food preparation,,
However, as I commit more funds into MOETF, this recreation can get out of control. Therefore it requires a robust firewall.

The positive stress is felt in a few specific stressor contexts listed in Q9.

  • Heavy allocation to growth ptf .. leads to net_negative effect on my overall stress profile, net_negative after considering firewall, buffer build-up.
  • Overwhelming allocation to dividend stocks .. has a 50/50 chance to net positive or net_negative stress, depending on the context

— destressor: firewall .. is designed for 1) stress protection, 2) portfolio protection.
Q: what frequency of ptf review is the max before it would lead to net_negative stress? Give a single number please
A: [3->6] a quarter
— destressor: steady DYOC .. (from my income portfolio) supposed to /defray/ a lot of annual expenses, reducing cash flow stress, but I have low cashflow stress in the first place.

Substantial DYOC should reduce the impact of a down turn, to be verified ..

— destressor: price buffer build-up has limited efficacy in stress reduction.
— destressor: diversification … meaningful diversification is not easy. Any evidence of that within a stock portfolio? I have not seen any.
=====
— Q: your notion of a wise investor? Beware not all “experienced” investors are successful in stress-management.

  • stress reduction .. keep the growth portfolio small (relative to…). This is my idea of a wise investor.
  • stress prevention
  • stress protection .. is hard to achieve, even for experienced investors
  • portfolio protection … defensive ptf? I don’t think this is a standard strategy among wise investors. Many wise investors don’t mind high volatility in a small ptf.
  • SP500_ETF .. (rather than mufu) is probably popular among those “wise” investors.

— Q9: (personal experience ) when I came under _certain_ types of stressors (but NOT other stressors), I would increase my recreational MOETF hour-allocation and dollar amount allocation. A paradox!

There are too many types of stressors even in a single person’s life. Let’s first focus on those stressors “friendly to” MOETF:

  • the stressor of plateauing growth: 江河日下,自强不息, midlife crisis #timetable@self-growth? Yes. MOETF represents a new frontier of self-growth[learning]. MOETF increases my sense of relative superiority. Recreational MOETF generates positive stress.
  • OC-effective? T_semiKai3mo2? FOLB? presumably effective : stress-reduction by recreational MOETF
  • BMI stagnation? workout frequency?
  • boy’s academic motivation?
  • spouse quarrels? probably a positive diversion

growth ptf +income ptf +.. #w1r3

Posted on by tiger40490

Many investors maintain multiple portfolios (for whatever reasons). I wish to keep separate portfolios so that only my growth portfolio is benchmarked against SP500. It’s unfair to benchmark the other portfolios that way.

  • income + stability ptf .. Note income stocks without stability is useless
  • .. aka defensive ptf .. for down turns.
  • international ptf .. probably not worthwhile
  • blue-chip growth ptf .. including TRBCX + a few ETFs. Benchmarked to sp500 [1]
  • speculative ptf .. mostly hot assets including ARK funds. I do (rather than “did”)  hand-pick a few speculative stocks but not exactly to beat SP500.
    • mrna
    • tourism stocks

Some stock picks would be homeless [i.e. hard to classify].

Some stock picks would be multi-homed, like both defensive and high-yield. Don’t bother. Instead, it’s more important to have sufficient allocation to meet the various needs [for income, for protection]

Q: how do I go about creating a “muti-portfolio view” from the combined portfolio?
A: No easy way. So this discussion is kinda academic

— [1] to beat SP500 you have no choice but trade hot stocks. You really need market timing. It requires more analysis, more babysitting (for exit timing). I don’t want to play that game, so I use ETFs as the bulk of my growth ptf.

— DYOC .. My income prt should have dyoc > 5%. Aggregate dyoc doesn’t make sense.

The growth prt would dilute aggregate dyoc.

 

##problems@judging by return alone

Posted on by tiger40490

See also

FTSE100 showing div stocks=slow

Posted on by tiger40490

FTSE100 offers many important observations/insights, but in this blogpost main focus is dividend stock picking.

https://www.hl.co.uk/news/articles/how-different-are-the-s-and-p-500-and-ftse-100 says

the FTSE 100 includes a lot of banks, oil companies and miners. These companies tend to be quite cyclical meaning they’re closely linked to the economic health of the country and tend to follow the ups and downs of the economy. They generally don’t have a lot of room for explosive growth. …  The S&P 500 trades on a price to earnings ratio of 22.2, which is much higher than the FTSE 100 – currently trading on a PE of 14.4. Additionally, the historic dividend yield on the S&P 500 is 1.8%, compared to 4.8% for the FTSE 100.

— DRIP
Note most comparisons of FTSE100 vs SP500 graphs ignore dividend. It is hard to verify but some authors say that DRIP would dramatically change the picture.

— hot tech stocks [hot money, low CDY] has a huge presence in SP500
I think four articles comparing FTSE100^SP500 (or DJIA) all singled out this as the biggest of many reasons for the superior 10Y performance of SP500.

Coincidentally, Vance of DBS said the Singapore STI suffers the same weakness. “Sunset industries”.

— survivorship bias and natural selection ..
If we compare two ETFs tracking FTSE100 vs any tech-heavy index, we need to ask which index is adjusted more often. Tech-heavy, frequently adjusted indices tend to benefit from survivorship bias and natural selection. If no adjustment allowed, then the fatality rate (of tech stocks) becomes more apparent.

I guess (without evidence) that a tech-heavy index ETF would buy low sell high more often, due to index adjustments. The passive ETF manager would follow the index, to swap out laggards and swap in rising stars.

This blogpost is about indices, but here is a digression. ARKK and TRBCX are more tech-heavy than SP500, and more actively managed. I don’t have the bandwidth or skill.

Buffett no longer beating (only)SP500

Posted on by tiger40490

Note SP500 is all-large-cap and all-US.

Buffett is no longer beating the SP500 in annual returns.

https://www.fool.com/investing/2019/12/22/5-reasons-warren-buffett-didnt-beat-the-market-ove.aspx is one of the better explanations.

In https://kernelwealth.co.nz/buffett-vs-sp-500/ , When asked whether Berkshire or the S&P 500 would be a better investment for a long-term investor, he did not hesitate to answer that “I think the financial result would be very close to the same”. Note he said “financial”, and only U.S. index can match Buffett’s financial results.

I wonder why Buffett (and many others) still stick to value investing “systems”? A big , complex question, but I don’t mind offering my simple, naive answers.

  • I believe value-investing is safer, less volatile, lower beta, higher Sharpe ratio.
  • tCost is higher, but I think the investor has better peace of mind than a SP500 tracking ETF investor.

j4 alternative ETF to SPY

Posted on by tiger40490

Background: I already have many (invisible) positions closely tracking the SP500.

In speed up: riskCapital4U.S.eq 20k #Aaron I explained the need(?? or unwanted peer pressure) to speed up my risk capital build-up. If I have not decided to allocate to a sector, but want to increase my exposure to the broad U.S. market as a whole,  then there are a few alternatives to the SPY ETF.

  • 80% chance I may realize that an “alternative” is very similar to SPY, not a real alternative. The buying decision was therefore misguided. The financial impact is likely small, so the tcost incurred was really for learning.
  • 20% chance that I may find something worthwhile in these alternative ETFs
  • tiny risk that the returns on these ETFs are really inferior to SPY. I take it as a market risk and learning lesson.

intelligence and 炒股perf

Posted on by tiger40490

Focus of this bpost is eq-investing performance

[[Irrational Exuberance]] has a brief debate on “smarter people will, in the long run, tend to do better at (stock) investing“. True over the very long term, but in reality, there are many complicating factors.

  • muddy: For the independent variable, researchers would want to use IQ, or high-school test scores in math + mother-tongue-reasoning (universal subjects), but I know that many Asian teenage students are better-trained in taking tests than non-Asians.
  • muddy: Most people use some N-year total return of individual’s eq portfolio as the dependent-variable. I think liquidity is crucial but not captured in total return. MOETF is more liquid than an ETF.

The most convincing argument for passive (kind of dumb) investing is that SP500 ETFs outperform many (not “most”) professional portfolios, assuming minimal expRatio. Q: Does it mean that smarter people like professionals don’t outperform the average passive investor? No. That would be a very flawed argument.

SP500 is among a handful of indices that are very hard to beat. The SP500 index committee is an active professional team.. smart people.

Beside US broad indices like SP500, the other regional indices are easier to beat. However, most regional indices consist of leading stocks (high-performance, high quality, blue chips) of the region. The timing of addition/removal of constituent stocks often reflects buy-good-sell-bad, a form of market timing. So investing in such a “leading index fund” is different from DCA-buying the entire market.

A smart investor actually can outperform now and underperform later compared to SP500. Over the long run, she might outperform.

A smart investor often has more advisors and have access to training or data that help her spot opportunities and avoid missteps/swans. Slightly lower chance of loss.

SP500/DJIA ETFs: !!passive funds

Posted on by tiger40490

k_ETF_assetClass

Mostly based on https://www.fool.com/investing/2019/02/09/how-are-sp-500-stocks-chosen.aspx

When a retail investor buys an ETF tracking sp500 or DJIA, she is mindless, but the sp500 and DJIA indices are not mindless. They are (not 100% passively) managed by smart professionals. Buy-n-forget SP500/DJIA ETF relies on the index committee as stock pickers.

— SP500 composition is (unlike other indices) not simply adjusted mechanically every few quarters
— SP500 doesn’t automatically become tech-heavy even when tech stocks grow to dominate the U.S. market
The committee wants sp500 to remain representative of the entire U.S. large-cap market.

I suspect that some admission criteria were introduced to disqualify tech stocks.
— Entering SP500, Profitability matters .. With few exceptions, companies must be profitable to get in. A key stock-picking criteria.
— Exiting SP500.. It’s much harder to get kicked out of the S&P 500 than to get in
“Addition_criteria are for addition to an index, not for continued membership. As a result, an index constituent that appears to violate criteria for addition to that index is not deleted unless ongoing conditions warrant an index change.”
— SP500 committee have discretion .. “The people who make up the index committee are some of the (TB: top 1000) most influential people in the financial markets”