One common response to my comments when they are posted on Fund Alarm, is "what is your performance?". I wish I could respond with the annual percentage gain for my portfolios over 35 years of investing, but I can't. And if I could, I doubt that you should believe me.
Now remember that when I started to invest, a computer took up the whole room and one communicated with them using punch cards. During my first real job, I bought a hand-held calculator for $50 that did less than what most $1.98 calculators do now. Later computer programs were available to calculate performance, but I would have had to enter the data.
I have made no secret of the fact that any success I have had with mutual funds has depended more on patient investing during the great bull market of 1982-1999 than on any brilliance on my part. At one point during that bull market, I decided I should track our retirement portfolios more carefully and so I began to enter transactions into Quicken. However both my wife and I were each making bi-weekly contributions into two different retirement programs each with several funds. I have various interests but data entry was not one of them, and so I soon gave that up.
So how have I tracked my performance over the years? Beginning in 1980 I constructed a crude index to monitor performance of our taxable accounts. Since I only adjusted this quarterly, there is an inherent error. For the most recent 10-year period, my gain per year is 9.3%. The Quicken calculation gives 9%, which happily is in general agreement but also suggests a likely range of error.
The general pattern of gains shown by this crude index is more interesting than the details. The rolling one-year gains have varied between -20.7% and 68.2%; the rolling 5 year annual gains have varied between 0% and 18.5%; the rolling 10 year annual gains have varied between 7.2% and 16.8%; and the rolling 20 year annual gains have varied between 10.3% and 14.2%.
Monitoring individual fund performance is relatively easy. Monitoring the total portfolio can be more difficult. Why should we monitor our total portfolio performance? Well, we could use it to impress our colleagues, friends, and enemies. But it is too tempting to be selective when we talk to others about our performance, and they might not believe us anyway. So I consider this a non-reason.
We do need to monitor performance in order to evaluate our strategy. If we choose actively managed funds but can't beat the index funds, we need to know that. If our allocation is supplying neither good performance nor effective risk reduction, we need to know that. However, fairly simple monitoring probably does fine for these reasons. These days, it is quite easy to compare individual funds with similar funds and benchmarks, and to monitor an asset class chosen for tactical reasons. To monitor overall performance of each portfolio, I primarily use a weighted average of 12-month performance and compare that to what I consider a bench mark appropriate for me (43% Vanguard Total Stock Market Index Fund, 12% Vanguard Total International Index Fund, 5% Vanguard REIT Index Fund, 40% Vanguard Intermediate Treasury Fund). I think this level of monitoring performance serves my purposes well, though it does not give me any bragging rights. As long as my total portfolio value continues to move up, I am content (and my wife won't complain).
In summary, it is reasonable for you to ask about my performance. However, I am not able to supply accurate total portfolio performance for my life in investing. Of course, I could make a crude estimate (i.e. make it up) but then you should not believe me.
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