Historical Rolling Returns - DCA into STI

[The Accountant]

Don't get the wrong idea. I read your posts and I know you are a person who practices DCA if i recall correctly. Good job if you are. I am not trying to ditch this method. In fact, I also strongly advocate all newbies to DIY and do a regular purchase of any stocks of their choice.

But we are often misled that STI can give a total return of 8% or more. I am also guilty of that. My objective is to find the actual returns if someone were to adopt a long term regular purchase of the STI. See and compare the returns on the regular purchase for various 20 year period.

My annualized return is a simplified conversion and I know it is not a perfect one.

The only 9% return from STI i ever saw was a ten year period ending Feb 2014. Looking at US, they manage to achieve higher than that during to go-go era only to find their bubble burst and had been on high valuation ever since.

The investment moat dude ever made an exercise for STI DCA from 2007 peak to 2015 using time weighted return. I recall it was almost 5%, that's when STI ETF was @ 3.40. Now that we are below 3, i suppose its gonna be lower. So actually the return very much depends on the market value at the end point and how long is your vesting period using DCA.

If we were to compare STI vs S&P, then i guess if we take into consideration of FX and cost, its pretty much around the same (+/- 1%, i remember someone ever did this exercise but not 100% fit per se.). The world is flat and the market is pretty efficient.

But here's what i think: the whole point about investing is to defer your purchase power at a later time, in order to consume. So, that will include inflation. If i were to give you a 9% return with 6% inflation vs a 6% return with 2% inflation, which one would you take? Sadly most investor chooses the first than the one later.

I actually don't encourage starters to stock pick. We are entering into a decade of low return but invest, we must still. however if we are going to increase our retirement sum, we are left with two options. Either we take on more risk in equities or we save more. Problem for starters, we (yes me included) often have low start up capital and stock picking consume a huge amount of time and energy. So taking more risk isn't gonna solve the problem. instead of stock picking, why not own a global portfolio and channel your energy and time into personal skills and earn that 20% salary increase once every three years? It's more efficient that way isn't it?

 

[Yachtmaster]

Yachtmaster and yyhwin have 1 thing in common. both nicks start with y. Both are not able to give meaningful contribution but are good at criticizing.

Mikedirnt and meaningless also start with M. Doing simple calculations and guesswork "add 3%" which a primary sch student can do.

 

[Yachtmaster]

Mine is neither Money nor Time Weighted Return. It is just a simple conversion.

Simpleton's method. Have fun

 

[Mecisteus]

Mikedirnt and meaningless also start with M. Doing simple calculations and guesswork "add 3%" which a primary sch student can do.

No wonder you are picking on me. You are the businessman who wanted to defer his HDB instalment. You were trying to squeeze some returns out of a pathetic low amount worth about $1k by defaulting to the financier.

Good luck with your travel business.

 

[Mecisteus]

The only 9% return from STI i ever saw was a ten year period ending Feb 2014. Looking at US, they manage to achieve higher than that during to go-go era only to find their bubble burst and had been on high valuation ever since.

The investment moat dude ever made an exercise for STI DCA from 2007 peak to 2015 using time weighted return. I recall it was almost 5%, that's when STI ETF was @ 3.40. Now that we are below 3, i suppose its gonna be lower. So actually the return very much depends on the market value at the end point and how long is your vesting period using DCA.

If we were to compare STI vs S&P, then i guess if we take into consideration of FX and cost, its pretty much around the same (+/- 1%, i remember someone ever did this exercise but not 100% fit per se.). The world is flat and the market is pretty efficient.

But here's what i think: the whole point about investing is to defer your purchase power at a later time, in order to consume. So, that will include inflation. If i were to give you a 9% return with 6% inflation vs a 6% return with 2% inflation, which one would you take? Sadly most investor chooses the first than the one later.

I actually don't encourage starters to stock pick. We are entering into a decade of low return but invest, we must still. however if we are going to increase our retirement sum, we are left with two options. Either we take on more risk in equities or we save more. Problem for starters, we (yes me included) often have low start up capital and stock picking consume a huge amount of time and energy. So taking more risk isn't gonna solve the problem. instead of stock picking, why not own a global portfolio and channel your energy and time into personal skills and earn that 20% salary increase once every three years? It's more efficient that way isn't it?

1) The DCA exercise done by him is using XIRR. So it is a money weighted return actually. Not time weighted return. I tried an XIRR on some of my data. Indeed the returns were quite under-stated. So good news to the firm believers of STI ETF. I see if I can change the calculation.

2) When comes to inflation, we can safely take that out of the picture when doing computation. Inflation affects every investing/saving instruments. Not just equities. Inflation affects our savings also. So just deal with nominal interest rates so as to avoid confusion.

3) Stock picking is more for the enterprising, experienced and aggressive investors/traders. Definitely not suitable if you are new. I started with stock picking with a diversified portfolio and regular purchase plans for a few years. Later on, I drop the RPP and focus on a few stocks only.

 

[FP_IFA]

The only 9% return from STI i ever saw was a ten year period ending Feb 2014. Looking at US, they manage to achieve higher than that during to go-go era only to find their bubble burst and had been on high valuation ever since.

The investment moat dude ever made an exercise for STI DCA from 2007 peak to 2015 using time weighted return. I recall it was almost 5%, that's when STI ETF was @ 3.40. Now that we are below 3, i suppose its gonna be lower. So actually the return very much depends on the market value at the end point and how long is your vesting period using DCA.

If we were to compare STI vs S&P, then i guess if we take into consideration of FX and cost, its pretty much around the same (+/- 1%, i remember someone ever did this exercise but not 100% fit per se.). The world is flat and the market is pretty efficient.

But here's what i think: the whole point about investing is to defer your purchase power at a later time, in order to consume. So, that will include inflation. If i were to give you a 9% return with 6% inflation vs a 6% return with 2% inflation, which one would you take? Sadly most investor chooses the first than the one later.

I actually don't encourage starters to stock pick. We are entering into a decade of low return but invest, we must still. however if we are going to increase our retirement sum, we are left with two options. Either we take on more risk in equities or we save more. Problem for starters, we (yes me included) often have low start up capital and stock picking consume a huge amount of time and energy. So taking more risk isn't gonna solve the problem. instead of stock picking, why not own a global portfolio and channel your energy and time into personal skills and earn that 20% salary increase once every three years? It's more efficient that way isn't it?

Well said.

 

[stam]

The returns seems pretty Low.

Posted with My iPhone 6plus S HardwareZone Forums app

 

[Mecisteus]

The returns seems pretty Low.

Posted with My iPhone 6plus S HardwareZone Forums app

They are under-stated because of my returns calculation. And without dividend returns.

But the idea remains the same, you need longer DCA period to stand a good chance of achieving higher and positive returns.

 

[OngHuatHuat]

Yes indeed very low. See my argument in the first few pages.

The returns seems pretty Low.

 

[ChickenAndDuck]

What does this thread tell us?

That DCA STI ETF was good, is good and maybe will be good in the future

 

[Yachtmaster]

Ok this thread is flawed from the very beginning. Here's a summary:

The ST Index data is available from yahoo finance. Period under study is from 4/Jan/1988 to 1/Jul/2016.

Data was all the way back from 1988 and he admitted he blatantly neglected time value:

Mine is neither Money nor Time Weighted Return. It is just a simple conversion.

He also ignored costs of every DCA injection, and of course its time value.
And he just declared 3-4% dividends out of "historical data" which is baseless.

Transaction costs are not included. Returns DO NOT include dividends. You can expect an additional 3-4% returns from dividends based on historical data.

Some people question it:

i dont think thats the right way... u r assuming all fund are deployed for the same amount of time (i.e. 20 years) which is not true... ur first Y is invested for 20 years, your second Y is invested for 19 year and 11 month... etc.... so you first Y de return sld be to the power of 240/12 and second Y de return sld be to the power of 239/12, and so on.

also, im not getting your value using ur method... u sld check if you downloaded the adjusted close value or close value.

No need to thank me. If u notice, I have not taken any position so far. I jus have issue ppl using wrong data or method which may mislead ppl decision, especially when no one question how the data was derived after debating for 7 or 8 pages

Some question it in a more diplomatic way:

That's a lot of effort you put in there. I'm not going to belittle your work here, I think it's pretty well done.

I guess when an investor tries to DCA, the investors return usually are very different from the historical data. That is because of time weighted variances like someone mentioned.

Actually what's the purpose of this tread?

At best, the TS will end up saying this:

Maybe you like to run your own calculation and publish them here?

Or this

Both are not able to give meaningful contribution but are good at criticizing.

As if this thread was anything useful in the first place.

I would say it is rather misleading.

Totally flawed analysis. Period.

 

[Mecisteus]

It is flawed because you have a personal vendetta against me from the HDB thread. Period.

Anyway I am not sissy enough to be affected by your negative posts.

 

[Yachtmaster]

It is flawed because you have a personal vendetta against me from the HDB thread. Period.

Anyway I am not sissy enough to be affected by your negative posts.

Frankly, I did not recognise you until you brought that out. No one is personally against you. If I say your theory is crap, it is because I think so. Perhaps you are just too egoistic to eat the humble pie, and I could tell that you are a very insecure person. Plug in the time values and try again.

 

[Mecisteus]

If I say your theory is crap, it is because I think so. Perhaps you are just too egoistic to eat the humble pie, and I could tell that you are a very insecure person. Plug in the time values and try again.

1) Because you think so? And you represent everyone? I have stated my assumptions in the 1st post.

2) I take your challenge with stride. I know how to do the calculation better. Stay tuned for the latest data.

PS: Mod why is this guy allowed to have a commercial travel website on his signature?

 

[Yachtmaster]

1) Because you think so? And you represent everyone? I have stated my assumptions in the 1st post.

2) I take your challenge with stride. I know how to do the calculation better. Stay tuned for the latest data.

PS: Mod why is this guy allowed to have a commercial travel website on his signature?

You *really* do not need to be so worked up and keep throwing out personal attacks

I pointed out your flaws is for the common good, not to challenge you. You need to be more confident of yourself.

 

[Mecisteus]

As promised, I have updated my findings. This is to take into account the regular period of capital injections.

The findings remain the same. That is, you stand a better chance of making positive and higher returns if you DCA for a longer period. But the numbers have gone up.

Returns(5Y) Returns(10Y) Returns(15Y) Returns(20Y)
<0% 73 64 17 5
>0% 211 160 147 99
>3% 182 131 114 80
>5% 133 82 55 6
Average returns 3.83% 2.83% 3.76% 3.59%
% of positive returns 74.30% 71.43% 89.63% 95.19%

 

[hindsight]

Looks much closer to the much-touted 7% now, though I'd still be satisfied with 5ish % in the current environment.

 

[Mecisteus]

Looks much closer to the much-touted 7% now, though I'd still be satisfied with 5ish % in the current environment.

the numbers are not too bad after all. i was expecting a lower number. but they dont include transaction/management costs yet.

 

[akwl88]

its all a matter of whether you believe sti can break all time high in the future a not

 

[Darkzi0n]

its all a matter of whether you believe sti can break all time high in the future a not

actually it dosent require STI to break new high for DCA to generate positive (and reasonably decent) returns.