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Hindsight 20/20: Retrospective Mutual Fund Return Calculator

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[OP]
Sr. Member
Jan 14, 2010
666 posts
207 upvotes
Central Ontario

Hindsight 20/20: Retrospective Mutual Fund Return Calculator

Does anyone know of an easy plug-in numbers calculator for individual mutual funds? I found an old "Portfolio Projection" from when an long-ago IG (ex)advisor was trying to get newbie me into a leveraged portfolio. I knew enough at the time that this was not the stage of investing or risk tolerance that I was at, but am now curious in hindsight how accurate the pitch was.

Here was the idea: borrow $100000, placing it equally into:
Investors Dividend $25000
Investors Govt Bond $25000
Investors Mortgage $25000
Investors Real Property $25000

This was proposed in 2003, and I have future projections numbers to 2013. It's a somewhat different world now, after the GFC and with real estate mayhem. Maybe I'm a masochist or maybe I just want to gloat, but can anyone tell me what I would have had in 2013 (then I can post the projections and see in hindsight if it would have been a good idea)? The paper I have is titled 'The Safe Way at IG,' let's see if that was true? :idea:
4 replies
Deal Fanatic
User avatar
Dec 14, 2010
6394 posts
7690 upvotes
First, this combination of assets is a variation of Couch Potato, you don't need a mutual fund for that. A few ETFs rebalanced yearly would do it.

Second, unless the mutual funds reveal their formulas (and they won't), I'm skeptical on their projections, because I have no way to validate it. It's too easy to data mine numbers and come up with a nice backtesting curve and a steady projection. The reality is that the future is unknown, so the only way for the fund to continue to perform consistently is to be based on fundamental rules that worked in the past and will continue to work in the future. If the rationale is simply a collection of appreciating assets with low correlation to one another, that's also a mechanism proven to work overtime - just don't need a fund for that.

You can have an idea of what you could have gotten by simulating it with ETFs. However, more details are required - which market (US, Canada, International?) Which market cap (small, mid, large cap?)

A much better combination, in my opinion, to implement something like this, would be an equal combination of small cap (IJR), long term treasury (TLT), medium term bonds (IEF) and gold (GLD). For the last 17 years, its annualized returns are 7.9%, while worst drawdown was at -13.8%, giving a Sharpe Ratio of 0.87.

Rod
[OP]
Sr. Member
Jan 14, 2010
666 posts
207 upvotes
Central Ontario
Thank you to both, I agree with most points and both of you have far more expertise than me on asset allocation.

FYI, the magic number quoted to me was $188967 after 10y, or a 6.57% return (ending in Jan 2013). So a bit more optimistic than your calculation Wes ($20000+ in 3 less years).

As I wrote, I knew it was not for me at the time and am happy in the decisions made (no longer with IG, essentially self-directed CPPing my own $$ only!), but I kept the worksheet to see 'what might have been.'
Deal Addict
Oct 1, 2006
2262 posts
2055 upvotes
Montreal
What would have been the interest rate on the loan?

Besides, in 2008 your portfolio would have lost around 30-40k due to the stock market crash. Not many people can handle these kind of losses and you may would have sold your investments for a heavy loss.
[OP]
Sr. Member
Jan 14, 2010
666 posts
207 upvotes
Central Ontario
Germack wrote: What would have been the interest rate on the loan?

Besides, in 2008 your portfolio would have lost around 30-40k due to the stock market crash. Not many people can handle these kind of losses and you may would have sold your investments for a heavy loss.
Both good points, and I totally agree; 2008 would have been a psychological disaster with leverage.
Can't recall the interest rate proposed, it was not clearly outlined as was deemed less necessary information. ;) I do recall the advisor saying not to worry about it, that the point was not to pay off the loan (which offended my debt-adverse sentiments!) because it would be tax deductible and would be covered by the investment return. :twisted:

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