Investing

Couch potato investing for the last 18 years - tracking my progress

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Member
Sep 9, 2012
372 posts
120 upvotes
TORONTO
eonibm wrote: That's great but it really means nothing unless you have 10-15 year+ numbers. The indexes (indices) could easily drop 40-50% as they did in 2009 again. I am not saying it will, but it could. The Shiller CAPE ratio (an indication of market valuation) has only been higher 3 times in the last century and each time it was followed by a crash. We could have a slower slide this time though. Who knows.

All I am saying is don't gloat on short-term passive index returns (or any short-term returns really).
Indeed! I fully recognize my results are at the whim of the markets.
Over the long term I expect the results will average out to the mean of around 7-9%.

I post the results for those who are wondering what kind of returns one would have had over the past couple of years with a couch potato portfolio, and a point of comparison to those who actively trade.

You've hit the nail on the head - the true test of a couch potato portfolio is what you do when the times are tough. Sit tight and stick to the plan, or panic?
Deal Addict
Jan 10, 2007
1863 posts
344 upvotes
Woodbridge
cash out , put all into appl

retire next year ;)
Deal Addict
Oct 1, 2006
3244 posts
4452 upvotes
Montreal
I believe more in slow and steady wins the investment race ;) .
Deal Addict
Oct 1, 2006
3244 posts
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Montreal
eonibm wrote: The other option would be to cash in your portfolio, pay the tax and use the net to buy a house. Likely in Montreal you could buy the house for cash. Then there's also always the option of doing the Smith Maneouvre with your mortgage.
I was thinking about this option, but when I did the math I got very discouraged. If I would cash out 500K and buy a house with the money my housing costs would increase from around $10200/year to around $37500/year.

Calculations:
Opportunity costs: 500K * 0.05% = 25K
Taxes: ~5 K
Utilities/Maintenance/Insurance etc.: ~7.5K
Total: 37.5
Deal Addict
Oct 2, 2006
1298 posts
258 upvotes
Germack wrote: I believe more in slow and steady wins the investment race ;) .
Good job sir i admire what you did, and wish to do the same one day
Deal Addict
Feb 3, 2008
1967 posts
556 upvotes
Winnipeg
Germack wrote: I was thinking about this option, but when I did the math I got very discouraged. If I would cash out 500K and buy a house with the money my housing costs would increase from around $10200/year to around $37500/year.

Calculations:
Opportunity costs: 500K * 0.05% = 25K
Taxes: ~5 K
Utilities/Maintenance/Insurance etc.: ~7.5K
Total: 37.5
But would it make your quality of life better? Would it be worth spending the extra money?
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Jun 22, 2012
4737 posts
722 upvotes
Shhanada
sunshinemoonlight13 wrote: /\ This.

A time series showing net asset value of a portfolio of investments increasing says nothing about the investment methodology in and of itself, when new money is put into the portfolio consistently from salaried income. It would be much better for readers to know the time weighted ROR for the period.

Reminds me of the Beardstown Ladies who claimed superior returns from their stock picking, but included in their calculation were net inflow of new capital. In reality, it was later revealed their investments actually did not even beat the S&P 500.
I raise it because most people are conditioned to see a line chart and think it's returns, while in this case it's total asset value.

But arguably, total assets is a useful metric, since that's the goal for an individual household. In the accumulation phase, it's actually more important to be making large contributions than it is to be getting a good return. Until your asset size reaches a (high) crossover point, what you plow in is a significant factor.
Deal Addict
Jan 7, 2007
1224 posts
92 upvotes
Wow - that is phenomenal. My investments suck and I have < 1/10 of what you put together. Great job.
Deal Addict
May 17, 2013
1775 posts
279 upvotes
SurplusPlus wrote: I raise it because most people are conditioned to see a line chart and think it's returns, while in this case it's total asset value.

But arguably, total assets is a useful metric, since that's the goal for an individual household. In the accumulation phase, it's actually more important to be making large contributions than it is to be getting a good return. Until your asset size reaches a (high) crossover point, what you plow in is a significant factor.
Well, first kudos to anyone who manage to grow their net worth over time. Its what all of this day in day out stuff is all about. Whether its investing, or starting a business, or working your arse off for salary.

However, I think you raised an important point early on and I agree. Looking at someone's growing net worth means nothing especially in light of this thread started with the context of supporting/selling one specific investing philosophy (i.e. couch potato). Someone who takes home a high annual household income, and miraculously spends very little, is bound to have a growing net worth over time whether or not they had invested that money. Certainly his investments (as numbers would show even with $100G income) have helped improve his net worth than had not not invested at all, but it would clearly be more useful to people if they had a breakdown of the actual returns instead.
Deal Addict
Oct 1, 2006
3244 posts
4452 upvotes
Montreal
My overall IRR is somewhere around 11% per year. Around 200K of my networth comes from capital gains, around 75K from interest/dividends income and around 475K from savings.

My interest/dividend income over the last last 4 years were as follows: 7.5k (2014), 16.2K (2013), 14.3K (2012) and 11.0K (2011).
Deal Expert
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Aug 2, 2010
15196 posts
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Here 'n There
Germack wrote: I was thinking about this option, but when I did the math I got very discouraged. If I would cash out 500K and buy a house with the money my housing costs would increase from around $10200/year to around $37500/year.

Calculations:
Opportunity costs: 500K * 0.05% = 25K
Taxes: ~5 K
Utilities/Maintenance/Insurance etc.: ~7.5K
Total: 37.5
Yes only a purely financial basis. But, some people put a high value on living in a house (ie having a front and back yard, more rooms, no landlord, etc), permanency of ownership (ie knowing they can never be booted out), knowing that all improvements to the property accrue to them when sold (if done wisely) and pride of ownership. One aspect of home ownership that does not apply to you is 'forced savings plan', ie people who need mortgage in order to save money but paying off their mortgage. You appear to be able to do this without having to be forced to. The intangibles though are something that are not worth it for everyone.
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Aug 2, 2010
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Germack wrote: My overall IRR is somewhere around 11% per year. Around 200K of my networth comes from capital gains, around 75K from interest/dividends income and around 475K from savings.

My interest/dividend income over the last last 4 years were as follows: 7.5k (2014), 16.2K (2013), 14.3K (2012) and 11.0K (2011).
To really find out you should do a weighted gain using something like the Modified Dietz Method.
Newbie
Dec 7, 2010
64 posts
4 upvotes
how many times a year would you reinvest/reallocate?
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Aug 2, 2010
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V2daTizzo wrote: how many times a year would you reinvest/reallocate?
whenever he has the money, as everyone should do
Deal Addict
Oct 1, 2006
3244 posts
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Montreal
Yes, this is what I do. I normally invest new money once or twice a month.
Member
Jun 17, 2009
491 posts
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Vancouver
You are getting to the point where you can actually live off from your interest/dividends. Nice job! Would you say you put in on average $50,000/yr of your own money into your investments?
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Deal Addict
Oct 1, 2006
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Montreal
Yes, this is correct. On average I put 50K/yr of my own money into my investments.
Deal Fanatic
Mar 24, 2008
6278 posts
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Toronto
Germack, you're at a point where I always wanted to be. Good job and keep it up!
Deal Addict
Jan 1, 2007
1320 posts
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Germack wrote: I was thinking about this option, but when I did the math I got very discouraged. If I would cash out 500K and buy a house with the money my housing costs would increase from around $10200/year to around $37500/year.

Calculations:
Opportunity costs: 500K * 0.05% = 25K
Taxes: ~5 K
Utilities/Maintenance/Insurance etc.: ~7.5K
Total: 37.5
When you say opportunity costs, you are assuming the 500K in the stock market will return 5% per year? In Canada at least, I think housing has returned this on a year basis the last little while. After your home is paid off, your bills should be what you have listed, 12.5K.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
engmsf wrote: When you say opportunity costs, you are assuming the 500K in the stock market will return 5% per year? In Canada at least, I think housing has returned this on a year basis the last little while. After your home is paid off, your bills should be what you have listed, 12.5K.
In simplistic terms, stock market produces dividends(~2-2.5%) + capital appreciation (3-5%) per year on a long term basis. I think it is a safe bet that in the long run (25+ years) a well diversified portfolio should beat 5%. But of course, nothing is guaranteed in life.

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