2016 XIRR Portfolio Return and Key Takeaways

Publish date: Thu, 22 Dec 2016, 08:02 PM

I always do this every year just to quickly see where I stand beside the benchmark, which in this case is the STI ETF.

XIRR is not an exhaustive measure for performance because it depends on many various factors, such as whether it includes cash. Mine did not include cash consideration otherwise it would have been a lot lower. A low XIRR in one particular year also does not mean that you are a lousy investor. Similarly, a high XIRR does not mean that you are a good investor.

We just need to be aware of the shortfall of the tools.

Many people have asked me on my previous post for the 31.8% growth year on year. To clarify, that includes capital injection and is simply a mathematical function of the overall portfolio growth. It does not measure the performance returns (though there are some correlation to it), which I will do so below shortly.

2016 XIRR Performance

My XIRR performance for 2016 returned 26.76% this year. The STI benchmark meanwhile returned 3.78% (measured as of 21st Dec). Both are inclusive of dividends.

If I were to focus on the performance, I'd take a look at the variance portion instead. To me, returning -20% when the STI is returning -40% in a particular year is a great achievement. I am not overly focused on individual returns but more focused towards what works and what doesn't work for me.

Captured as of 21st Dec 2016*

10 Key Takeaways

There a couple of key takeaway which I wanted to pen down for my future reminder. I think this is more important than anything else to make me become an even better investor.

1.) Kingsmen is still currently my biggest under-performance because there is no margin of safety when I bought them in 2015 (key takeaway for 2015). The loss has now narrowed down after receiving dividends to lower down the costs but they are still down 10% as of writing.

2.) The China scare in the beginning of the year was a fantastic opportunity to go aggressively long on the portfolio. If you look at the portfolio, it went down sharply in Jan and Feb but rebounded back strongly a couple of months thereafter. It was an opportunity to add position into some of the stronger companies.

3.) There were plenty of volatility this year - Brexit, Trump and Italy Referendum and opportunities are aplenty during such uncertainties. I simply love events like this because I can take advantage of it. Forecaster who predicted that the market will be shocked are left dumbfounded when the market continues to edge higher.

4.) Cash is such an important call option function. We need to have sufficient warchest when the big opportunity comes. Having more cash means more "bullets" to average down on strong companies when the market continues to discount them unfairly.

5.) Have a plan. Stick onto the kind of strategy you have envisioned from the start, always have a back-up plan and think of the worst case "what-if" scenarios should things backfire or doesn't go to plan.

6.) Do not jump onto the crowded bandwagon. At the beginning there was Keppel, then M1 and then now Sabana. It is entirely ok not to participate in such bandwagon if we are not comfortable with it. If want to initiate a position, ensure that we always know the valuation of the company and wait for the crowd to subside down before entering. That's usually when you get your maximum risk reward.

7.) Always be flexible in our strategy and approach. Do not be overly defensive on our own strategy no matter how much we believe in as we may be blinded by our own blind spot.

8.) Value investing is such a hotly sought after word that everyone wants to be associated with it. Value investing can come in many forms, depending on how you view it. Benjamin Graham and Warren Buffet style of value investing are not the only successful one out there.

9.) Always know your character and choose the style of investing that suits your character.

10.) Always be humble about our own performance, regardless of how we did in the year. There are always things that can be improved upon and things that we can pick up and learn from others. If we are not doing well, embrace criticism and feedback with acceptance and improve upon it.

Diary,
B

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