In a recent and heated Bagholder pod video, one commentator suggested:
Fortunately, IBKR provided this number for me directly to my mailbox: 17.16% p.a.
This is the money weighted return (MWR) of my IBKR portfolio (which is almost my entire stock portfolio, excluding the two much smaller portfolios that I have invested in STI ETF via SRS and my Endowus portfolio, which primarily invests in the Amundi Prime USA Fund, an S&P500 replica).
The time period is from 14 September 2017 to 10 July 2024, covering almost 7 years.
Now, I would like to address a few points related to CAGR:
1. Do I think that this return is great?
If you compare the 17.16% return to the SPY return in the same period, which is 14.53%, the outperformance is only 2.6%. If you read enough financial blogs, you will realize that many people claim it is very hard to beat the S&P500, and even many professional fund managers can’t achieve that. That is why many advocate for passive ETFs tracking the S&P500 or VWRA tracking FTSE All-World. However, a 2.6% outperformance isn’t a huge margin; it mainly resulted from the luck of owning Nvidia before the recent AI rally. Who knows, it may crash back down in the second half of 2024? I am pleased with the returns, but I don't think they are fantastic, given that we are in the midst of a bull market and the numbers can turn south significantly at any time.
2. Do I think that this should earn me credibility and show competency?
This is a big no. My historical return performance shows that my portfolio lagged behind the S&P500 for considerable periods from 2017 to 2019 and from 2022 to 2023. If I need to have good historical performance for my words to carry weight, does that mean my opinions during the underperformance period are bad and opinions during the outperformance period are good? Just one extreme example, would you rather hear me talking about Nvidia in 2022 or 2024?
3. How do I interpret this historical CAGR?
It is quite simple. My portfolio is different from the S&P500. It is more technology-focused and includes companies outside of the United States, such as TSMC, Tencent, and ASML. The returns will not be the same as the S&P500. Some periods will outperform, while others will underperform, depending on the prevailing market conditions and trends.
4. Is my investment objective to beat the market index?
The answer is outright no. I recognize that it is very difficult to beat market benchmarks (e.g., the S&P500) for any period, and I don't spend long periods analyzing stocks. However, my edge relative to the average investor lies more in behavioral traits. For example:
I buy quality companies and hold them for the long term.
When stocks experience volatility, I focus on the business and avoid panic selling.
Even if share prices drop, I remain patient because I don't need this money in the short term.
Even if the stock market underperforms the market or even below CPF returns (e.g., 4%), I still have a decent amount of CPF that can support my retirement, serving as a solid safety net.
To round up this post, I understand viewers' curiosity in knowing the track record of others, particularly if they are considering whether the opinions of the investor/content creator should be given any weight. I am also curious about other people's track records. However, I do not give too much weight to track records, especially if they are short (e.g., 5 years).
Content creators put out facts and opinions in various formats. You, as a viewer or reader, should also do your own due diligence, absorb content from various sources, validate those facts, and come to your conclusions. Do not trust anyone simply because they self-claim to have a good track record. To give you an example, even the 17.16% that I quoted above could be fake. How are you going to validate those numbers?
As a content creator, I can only try to build trust by being transparent. For instance, I share my returns during both good and bad times. You can take a look at Chi Keng's interview with me when my portfolio was down by $200k.
Anytime sir
This is a very good write up. Can I invite you for a guest episode?