Johnny apples
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The reason I'm interested in the figures are as follows. I've listened to a few different commentators explaining the effect volatility has on compounding . The reasoning is that if two different investors both had returns averaging 10% per year for 10 years but investor A had wilder fluctuations as in up 30% and down 30 versus investor B with lower volatility as in up 15% and down 15% , then the effect of compounding would be greater for the lower volatility fund. Correct me if I'm misinformedAs I say, if anybody (ideally the originators of the original annualised returns data) wants to provide cumulative return figures (for each year?) I'm happy to add them to the table or a second table.
Cumulative Returns (Based on the Data from Clubmans Table), ignoring distributions (and ignoring 2011)Cumulative is what matters. € 10,000 invested in 2012 , what it worth today ? based on all three investments.
Year | Managed fund | Index tracker | Colm's ARF |
2012 | 1.12 | 1.14 | 1.24 |
2013 | 1.36 | 1.35 | 1.52 |
2014 | 1.61 | 1.62 | 1.77 |
2015 | 1.79 | 1.75 | 2.00 |
2016 | 1.97 | 2.00 | 1.89 |
2017 | 2.16 | 2.11 | 2.41 |
2018 | 2.03 | 2.02 | 2.04 |
2019 | 2.63 | 2.64 | 2.96 |
2020 | 3.02 | 2.74 | 3.02 |
2021 | 3.85 | 3.66 | 3.50 |
2022 | 3.09 | 3.18 | 3.22 |
2023 | 3.77 | 3.76 | 3.82 |
2024 | 4.84 | 4.74 | 4.22 |
Managed fund | Index tracker | Colm's ARF | |
Avg Return | 13.8% | 13.5% | 12.8% |
Std Deviation | 0.14 | 0.13 | 0.16 |
You may be referring to "pound cost averaging" which is a mathematical feature of regular investment.The reason I'm interested in the figures are as follows. I've listened to a few different commentators explaining the effect volatility has on compounding . The reasoning is that if two different investors both had returns averaging 10% per year for 10 years but investor A had wilder fluctuations as in up 30% and down 30 versus investor B with lower volatility as in up 15% and down 15% , then the effect of compounding would be greater for the lower volatility fund. Correct me if I'm misinformed
However it is possible to get an even higher rate of return with less risk by choosing the Globally diversified Index tracker.
Well Colm was actually beating both the other funds right up until 2024 (albiet with more risk).Isn't that Gordon's key point?
And the difference is even bigger over different timescales (say, over the more normal period chosen for comparative purposes of 5 or 10 years)
Is Colm trying to help Joe & Josephine make an investment decision? I'm not so sure. On a personal level, as someone who will eventually drawdown from an ARF, it's interesting to see how he's getting on, through the ups and the downs. Would I invest the way he does? No I wouldn't. I'm all-in on a global equity fund, and have neither the inclination nor the time to even try to do anything different. I formed that opinion in a large part thanks to reading the debates that go on on threads like this. Could someone like Joe or Josephine be spurred on to follow Colm? Maybe, but I tend to think there's enough information on AAM to allow people to make up their own minds, just as I have done....I struggle to see how Colm's posts help Joe & Josephine Arfer in any practical way whatsoever! Can some of the posters who enjoy Colm's post explain how they believe Joe & Josephine benefit from these posts? I genuinely can't see it myself.
Would it be fair to say that despite what the annual figures look like, that in fact Colm's returns are pretty similarCumulative Returns (Based on the Data from Clubmans Table), ignoring distributions (and ignoring 2011)
Year Managed fund Index tracker Colm's ARF 20121.12 1.14 1.24 20131.36 1.35 1.52 20141.61 1.62 1.77 20151.79 1.75 2.00 20161.97 2.00 1.89 20172.16 2.11 2.41 20182.03 2.02 2.04 20192.63 2.64 2.96 20203.02 2.74 3.02 20213.85 3.66 3.50 20223.09 3.18 3.22 20233.77 3.76 3.82 20244.84 4.74 4.22
Managed fund Index tracker Colm's ARF Avg Return 13.8% 13.5% 12.8%Std Deviation 0.14 0.13 0.16
A few pieces of Context, Colm's performance is far superior to the vast, vast majority of ARF investors who would be mostly invested in "Lifestyle" or balanced funds which would include a high proportion of Cash or Bonds.
However it is possible to get an even higher rate of return with less risk by choosing the Globally diversified Index tracker.
The only reason the Managed fund outperformed the Index tracker was the huge difference in performance in 2020 (14.72% Vs 3.87%), a difference so large that I would ask to double check that original information).
Colm's overall strategy (invest for the long term in almost exclusively equities) is the right strategy.* Cash, Bonds and ALT's will drag on performance. It's knit picking but tactically, by choosing the Globally diversified Index tracker, it is possible to get an even higher rate of return with less risk
*with the caveat that you have enough to weather down years.
Yes, which is what you should expect.Would it be fair to say that despite what the annual figures look like, that in fact Colm's returns are pretty similar
No matter how many times you say it there are still those who can't/won't believe it. My comparison figures are on an execution only identical basis where an execution only fee is negotiated with the provider (by me) because the ARF is very substantial. Net means Net.All figures net of all costs
I know @GSheehy charges 0.25% p.a. for his execution only service.
If you are making a constant percentage withdrawal the sequence of returns does affect your cash flow, which of course matters, but it makes no difference to the final fund value.Hi @Johnny apples,
If you are investing in an ARF and drawing down money, the sequence of returns does indeed matter. If I get a chance later, I'll model, say a 4% annual withdrawal. However, I wouldn't expect much of a difference in the key takeaway here.
Yes, it's accurate. If you were in the other concentrated (50 global stocks) on same platform, the figure was 18.31%.a difference so large that I would ask to double check that original information).
I sincerely doubt anyone can be sure on that one!Is Colm trying to help Joe & Josephine make an investment decision? I'm not so sure.
I know. I wasn't intending to do a 4% constant withdrawal. I was intending to do a 4% withdrawal of the value at the beginning of the relevant 5 or 10 year period (as in replicate something Joe & Josephine might actually need!) This would impact the figures but I suspect not to any material degree in this sample!If you are making a constant percentage withdrawal the sequence of returns does affect your cash flow, which of course matters, but it makes no difference to the final fund value.
My first thoughts on looking at the original table were "What index had that return for 2020?" filled by "Maybe it's a typo"The only reason the Managed fund outperformed the Index tracker was the huge difference in performance in 2020 (14.72% Vs 3.87%), a difference so large that I would ask to double check that original information).
If you are investing in an ARF and drawing down money, the sequence of returns does indeed matter. If I get a chance later, I'll model, say a 4% annual withdrawal. However, I wouldn't expect much of a difference in the key takeaway here.
Possibly, but that isn’t really the point (i.e. comparing other approaches, e.g. being 100% in cash with Colm’s approach). It’s really about the time cost, the increased risk, and the ‘proof of the pudding’ in terms of the real world outcome. Colm is wasting his time and setting a bad example for others because stock-picking in your own ARF in a concentrated manner is madness. He’d be better off lying on a beach with his ARF 100% invested in Zurich’s International Equity fund at 0.5%.Well Colm was actually beating both the other funds right up until 2024 (albiet with more risk).
My point is that Colm overall approach is correct, but for the average investor you can optimize it to be even better.
Paraphrasing, but I think Gordons point is that Colm is a "Fool" for even trying to pick himself. But the reality is that Colm is far better off than the vast majority of ARF investors.
Colm is in the right forest and Gordon is saying he's stupidly picked the wrong trees. But most everyone else is not even in the forest.
Can't quite remember why I chose a High Dividend fund. I suppose it is down to my three rules for choosing investments: Tax, Tax and you guessed it. High Dividend shares should stand at a small discount because in general they are subject to higher taxation and so that should be a free lunch in an ARF. Seems to have cost me about 10% in 2024
I haven't thought it through to any great extent and was just wondering why I went for High Dividend. In general dividends are treated more unfavourably than capital gains for tax purposes. But in a ARF wrapper there is no difference so if there is a discount because of general taxation it is a "free" discount in the ARF. For example, if I were to DIY my ARF I would fill it with high yield stocks like Phoenix with double digit yields. I certainly did not develop this hunch to the detail of how US shares would be impacted. Or maybe I was just persuaded by the term "High".Can you explain why you think this should be the lunch on the house please? I would have thought that High Dividend funds within pensions were generally tax inefficient especially for US shares.
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