Wednesday, 26 April 2017

Historical Performance against Benchmark

Decided to analyze my historical performance as compared to benchmark. So took time to gather data from SGX, SPDR and yahoo finance. I am grateful that SPDR actually responded to my request and provided me with yearly performance of SPDR STI extracted from Morning Star Direct. On yahoo finance, I can only get data until 2008. While not ideal, it's good enough for me to do some analysis.

Comparison of Yearly Return





















*From 2003 to 2010, data from Morningstar Direct, obtained via SPDR Head of ETF Sales Strategy & Research. From 2011 onwards, data from SPDR STI ETF Semi-Annual Reports.

As seen from the table, out of the 14 years, my cash portfolio did better than benchmark only for 50% of the time; while CPF portfolio fared slightly better, outperforming by 64% of the time. However, if I scope it to the past 10 years, then things do look a lot better. Cash and CPF portfolios outperformed benchmark 70% and 80% of the time respectively.

Comparison of Compound Annual Growth Rate










* Obtained from 2016 SPDR STI ETF Semi-Annual Report.

Due to the good performances of the past few years, I have done better than benchmark in all the periods listed for both cash and CPF portfolios.

If I would to use the same amount of money to buy my cash portfolio, cpf portfolio and SPDR STI ETF on 31 Dec 2007......

* STI ETF prices obtained from Yahoo Finance. Assuming DRIP with STI ETF dividend, with issuing price tied to record date of dividend. Use 10 Jan 2008 STI ETF price for 2007 data point.

STI ETF would only return an average 0.4% annually. Cash and CPF portfolio would have a CAGR of 6.5% and 12.2% respectively. 2008 was the year of market crash due to sub-prime crisis and it definitely has an effect on the return.

Fast forward one year, if purchase was made at the end of 2008 (after the crash), STI ETF, cash and CPF portfolios would have an average annual return of 9.1%, 14.1% and 23.7%. 

Fast forward another year, if purchase was made at the end of 2009 (after the market recovered),  STI ETF, cash and CPF portfolios would have an average annual return of 2.7%, 11.9% and 15.7%.

The story behind the numbers

As seen from the various comparisons, performance in the initial years were mediocre for both cash and CPF portfolios. Both performed below the benchmark. Memory is failing but there were probably lots of short term buying and selling with s-chips a feature in the cash portfolio. 

In 2007, sat down and put on record a goal and strategies for both portfolios. Reading the past posts, cash portfolio was more inclined to growth investing, while CPF portfolio was inclined to dividend investing. 

Things seem to improve after that with CPF portfolio doing much better. So is dividend investing better than growth investing? Maybe but another factor that might have affected the performance is the amount of buy and sell. Due to CPF limit, I basically have only two holdings - First REIT and Metro after 2009. Since then, addition was due to Metro's bonus shares, First REIT's rights issue and DRIP. On the other hand, there is still quite an amount of buying and selling, hit and miss with my cash portfolio.

The next milestone came in 2014 and 2015 when I decided to review my goal and strategies. Not much change to CPF portfolio but I started to purchase STI ETF since 2014. As for cash portfolio, I am shifting from growth focus to a balance of growth and dividend. You can read more about it here. A refinement is made recently and can be found here.

I would think that I have also improved in analyzing a company as I have learned a lot more in the past two years from various investing platforms such as Motley Fool Singapore, Big Fat Purse (known as Dr Wealth now), The Fifth Person, The Edge and various financial blogs.

I have obtained an excellent return in 2016 (mainly due to Best World) and 20171Q, but a 2 years period is probably too short to conclude the effectiveness of the new strategies. However, it does give me confidence to continue on this investment journey.

Ending Note

Goal setting supported with strategies is essential if one wants to be successful in this journey. Going forward, I will continue to review my performance and refine my strategies. 

I believe that my CPF portfolio will continue to provide good return.  I hope that with a more active investing approach for my cash portfolio, its return will eventually catch up with that of my CPF portfolio.

4 comments:

  1. Solid performances over the past recent years. I think it works a lot in your favor as you did better in the recent years where your portfolio is bigger as when you just started.

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  2. Indeed and am grateful for that. Flagging out the initial years to remind myself of mistakes made.

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  3. Fantastic performance. May we still be in blogger sphere for decades to come. Just a fact check on STI index. Do you include dividend in your computation ?

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  4. Thanks. Yes, included dividend for STI ETF.

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