Thursday, March 06, 2008

Portfolio Performance

In my ongoing evaluation of my Mom's portfolio I've calculated some annualised rate of return * performance figures:

I don't have data for every month but I do have data for four out of the last five Marches, which allows me to calculate the numbers in the table. In the last one, two, or three years we have performed favorably compared to the S&P 500 index. It's not surprising that the portfolio underperforms the SPX over five years due to its low equity content. In the first two years of the bull market we gained 11% p.a. which was below the SPX performance in those years. 8% p.a. is probably an acceptable return for a portfolio of this sort in the long-term, but it would be nice if we can increase it. OTOH we nicely beat the average hedge fund, which only earned 6.5% p.a. in 2003-2007.

* Rate of return for Moominmama's portfolio is simply the growth rate of the portfolio - so this is an after tax and net spending/saving figure. Moominmama receives some pension income which covers day to day expenses so usually there isn't much draw on the portfolio. Moom's rate of return is pre-tax and obviously doesn't include saving or spending effects.

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