Saturday, 18 November 2017

What is keeping you going in your work?

    1. Money?

    2. Sense of Purpose (aka 使命感)?

    For pondering.






    [I made an update to my previous post on Money Management for your reading pleasure.]

    Sunday, 12 November 2017

    Money Management plus Method - I

    My general guide for assets allocation in equity relative to STI:

    ST index Tier% Equity holding %
    above 3600 90 <10 td="">
    3400 85 15
    3200 80 20
    3000 75 25
    2800 70 30
    2600 60 40
    2400 50 50
    2200 40 60
    2000 30 70
    1800 20 80
    below1600 10

    (We can use in conjunction with TA rather than blindly catching falling knife.)

    -----------------------

    Methods of Asset Allocation:

    1. Strategic asset allocation calls for setting target allocations and then periodically rebalancing the portfolio back to those targets as investment returns skew the original asset allocation percentages. The concept is akin to a "buy and hold" strategy, rather than an active trading approach.
    2. Tactical asset allocation (TAA) is a dynamic investment strategy that actively adjusts a portfolio's asset allocation. The goal of a TAA strategy is to improve the risk-adjusted returns of passive management investing. 
    There are more, if you are interested... read more here https://www.investopedia.com/articles/stocks/07/allocate_assets.asp
    or get your hands on 'The little book that saves your assets' by David M. Darst.

    ***

    Book review: High returns from Low risk

    Image result for high returns from low risk


    Learning points from this book:
    • In the long-run (the author used data of US traded stocks over 86 years), low-volatility stocks are shown to give a higher return.
    • Comparing portfolios of varying volatility - as volatility increased from 13% to about 20%, compounded return increased. As the volatility increased further beyond 25%, compounded return declined.
    • How to select the right low-volatility stocks? Look at
      • Beta less than 1
      • the stock's income yield and
      • momentum (price trend)
    • People who underreact to news when it comes in gradually run the risk of being 'boiled' (boiling frog syndrome).
    • The selection of low-volatility stocks can be applied to other investment vehicles as well e.g bonds. 
    • Hold if the above three points still hold true while reviewing your portfolio.

    ***

    A fairly simple to read book, with simple concepts and no 'cheem' investment theories. The back chapters talked about some zen which I fell asleep reading.

    Thursday, 19 October 2017

    C52 Comfort Delgro - downtrend continues

    Start of downtrend

    Still no sign of reversal...



    Speaking those who buy-and-hold versus those who chased the market. 
    Who's the winner?


    Ah... the good ol' days.


    *Disclaimer: I have no vested interest in C52 currently.

    Wednesday, 18 October 2017

    Richdad's cashflow game

    My friend introduced me to the richdad's cashflow game which can be played online for free (click here to play). I think it's a great beginner learning tool to introduce kids (or anyone else lacking in financial literacy) to grasp certain concepts of cash-flow and investing.


    Takeaways from the game


    1. Clear your debts first

    2. You don't have to act on every opportunity

    3. Calculate the yield % on investments that give passive income before investing

    4. Investing needs both elements of skill and luck

    5. Buy low, sell high (patience, patience... duh)

    6. More money = more investment opportunities = higher returns

    7. Life likes to throw you the unexpected when you least expect it

    8. Even if you have achieved financial freedom, you might not necessarily get to achieve your dream

    ***

    Friday, 13 October 2017

    Don't know when to sell in a bull market?

    “Bull markets are born in pessimism, grow on skepticism, mature on optimism and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.”

    - Sir John Templeton

    Saturday, 7 October 2017

    Blockchain: Massively Simplified

    All that hype about bitcoins and block-chain led me to wonder what am I missing out here.
    Ok... so bitcoin is a cryptocurrency (with no practical usage at this point in time but price is inflating like mad balloon??). Then what is blockchain about?





    Just wondering - if blockchain one day became hackable, wouldn't that spell hell?

    ADVANC's intention to acquire stake in Singtel

    Did I read wrong?

    "Advanced Info Service Public Company Limited (SET:ADVANC) signed a non-binding and conditional letter of intent to acquire 56.2% stake in Singapore Telecommunications Limited (SGX:Z74) from Singapore Telecommunications Limited (SGX:Z74) and DTV Service Company Limited for THB 2.6 billion on September 5, 2017. The shares will be acquired at a preliminary indicative price of THB 7.8 per share which is subject to further negotiations and/or due diligence. The transaction is subject to satisfaction in the due diligence result, approval from the Board of Directors and the approval from the shareholders of Advanced Info Service Public Company Limited, Thaicom Public Company Limited and Singapore Telecommunication Limited"
    [Source: SGX]


    2.6 billion (2600 millions) THB is only about SGD 106 millions.

    I wonder how they came up and justify with such low figure in the letter of intent for acquisition. Or maybe there's some missing link here?
    Baffled.

    The "chionging" bull

    S&P500 now at 254. https://stocks.cafe/stock/summary/S27?basicchart=0&days=1260&exchange=XSES

    Chiong, chiong, chiong. Good for those who bought and huat, huat, huat.

    ---
    STI now at 3291.

    Friday, 6 October 2017

    Who's 武林秘籍 do you follow?

    Short-term Traders
    Ricardo, Jesse Livermore, George Soros, Steinhardt

    Value Investors
    Benjamin Graham, Warren Buffett

    Growth Investors
    Philips Fisher, Rowe Price, Peter Lynch

    Passive /Index Investor
    John Bogle (founder of Vanguard)



    Or how about mixed martial arts?
    :)

    Apps for little rewards

    In addition to using credit cards or debit card in spending to get 'rewards', here are 2 other avenues that require minimal efforts to get little rewards.



    As they worked via app, it is really convenient. You only need to remember to scan within the same day to get the points. :)


    1) CapitaStar

    If you stay or work near any Capitamall, this would be a good app to have (you can also get bonus star$ for using the app first time). Furthermore, if you are Passion Card member, you can link up your account and get 1.5x Star$ (normally is 5 star$ awarded with every 1 dollar spent). Simply spend a minimum of $20 or more in a single receipt.

    You can also convert the star$ to Tap-for-more points (11 to 1). However, saving enough star$ to get voucher is more 'hua suan' because 5000 star$ can get you a $5 capitamall voucher versus 150 points (1650 star$) for offset of $1.

    Just remember to redeem before expiry!


    2) Healthy 365

    This app by Health Promotion Board works similarly to CapitaStar. Just that you scan the QR code on the receipt to redeem Healthpoints (till 31 Oct 2017) instead of star$. Click here for full t&c.

    Upon first use, you can get bonus Healthpoints. So it is really easy to get enough points to redeem say an NTUC $5 voucher.

    Participating merchants are selected food courts, hawker centre, restaurant (even Mcdonald's), coffeeshop, drink kiosk (like Mr Bean) convenient stores and supermarkets.

    All you have to do is look out for and purchase food, drinks or products with the healthier choice logo to earn the points.



    And a side note for those who travel by BMW (bus, mrt, walk), you can participate in the Travel Smart Reward program to earn some points and rebate when you travel during off peak periods with your ezlink card.

    Fuss-free candies, why not just take?

    Thursday, 5 October 2017

    Good lobang - DBS Visa Debit Card



    https://www.dbs.com.sg/personal/cards/debit-cards/dbs-visa-debit?pid=sg-dbs-vanity-cards-dbs-visa-debit
    Image result for dbs visa debit card


    Highlights:
    • From now till 31st December 2017, accumulate a foreign currency spend of S$1,500 on DBS Visa Debit Card and get S$50 Cashback.
    • Get S$10 Cashback when you charge S$200 to your new DBS Visa Debit Card within the first month.
    • Get 5% cashback when you pay using Visa payWave, through your card, Apple Pay, Samsung Pay or Android Pay. Keep your cash withdrawals to three times or less and up to S$400 every month.

    The deal's a bit sweeter than the Standard Chartered Unlimited Cash Back credit card which I have just gotten. (However, SC's sign up cash back is damn good.)



    ---------------------

    The best decision I made today is to bring in my clothes, even though it was bright and sunny before I left house. 天有不测风云。It started raining cats and dogs when I was walking home. 

    Moral of the story:
    Make hay while it shines. Just remember to take profits off the table before sky turns dark (especially if you aren't very diligent in monitoring the weather).

    Blue-black chips' 2 years flash back

    A quick recall to my old blog post Blue Chips in Red Sea, I have done another mini simulation here. (Got nothing much to do in my short break before starting new work hehe.)

    This was the list I put up in Sep 2015 -


    Fast forward 2 years...

    Which are the 'blue-black chips'?



    Most of the chips managed to rebound quite a bit, except Noble Group and a handful of the black sheep. CityDev, Jardine, Genting and GLP soared.
    [Apologies for missing out Capitaland that time.]


    Have you made the right choices 2 years back?

    :)

    --
    Let's take a look at how the 'blue-black chips' dividends are doing.

    ComfortDelgro - Yield has increased YOY. Recent dividend payout in August was $0.0435. As for how its dividends would keep up in future I find it hard to say since it has quite a few sub business units to keep it afloat while Uber and Grab grabbed its taxi market share. At least one can take comfort in its dividends. No pun intended.

    HPH Trust - Dividends have been declining since its crazy high in year 2012. Thus, it makes a poor dividend play stock. And as we thought Trust is about returns through payouts... cough cough.

    M1 - As we can see, the telcos weren't doing too well in this bull run. Only Singtel managed to withhold the storm well (smart move to IPO Netlink trust). M1's dividends dropped significantly this year. With about a 40% drop in its dividend from past average, it's no surprise that there's a 40% drop in share price.

    SPH - The past high dividends of $0.07 and $0.08 are also suffering a drop to $0.06 and $0.03. That is no doubt tied in with its earnings. When I started investing 7 years back, my friend bought SPH and I was chiding myself for not doing so. Looks like time changed - what seemed cheap 7 years ago still cheap now? Think.

    Starhub - This is one stock that I have been watching due to its consistent dividend of $0.05. I wanted to type '10 years no change' then paused... cos I realised in 2007 it was $0.04. Do you feel the déjà vu? 
    Singtel's dividends also see no light. I shall just sit on the sideline for telcos for now.


    Just a side note, GLP and CityDev's dividends can't beat inflation. Good for capital play but maybe not so good for long-term investment (of course also subjected to one's entry price).


    Tuesday, 3 October 2017

    Peter Lynch and the blue chips

    It's always good to learn something new from blog reading. Those scraps of information are like bread crumbs which can lead me to discover more interesting stuff about investing - to know what I don't know. As the saying goes, danger lies when you don't know what you don't know.

    Stalwart - simi lai?

    "Stalwart is a term popularized by legendary stock picker Peter Lynch to describe a large, well-established company that still offers long-term growth potential. "

    "In addition to a strong balance sheet, one of Lynch’s key measures for a stalwart company is the P/E growth ratio (PEG), which is calculated by dividing the company’s price-to-earnings (PE) ratio by its earnings growth rate. Lynch determined that PEGs below 1.0 were an indication of an underpriced stock relative to its growth rate. He considered stocks with PEGs below 0.5 to be a real bargain. For dividend-paying companies, he factored in the dividend yield to arrive at a yield-adjusted PEG ratio. Wal-Mart is often cited as an example of Lynch’s stalwart methodology."

    [Source: Stalwart http://www.investopedia.com/terms/s/stalwart.asp#ixzz4uQvSnJIq]

    哦,P/E还可以这样子用的喔。

    I interpret it as - stalwarts are generally companies with strong moat / competitive edge. Their offerings and business models are either difficult to replicate or monopolizing. As such, it is difficult for newer, smaller cap companies to gain market share from them. 

    However with the rapidly evolving technology and the rise of new business models, it is no surprise that some of these stalwarts may find their offerings getting obsolete if they are unable to keep up with change. Examples were Nokia and Fujifilm.

    -----------------------------------

    Just a fun simulation here based on an old blog post of mine last year - http://rainbowcoin.blogspot.sg/2016/03/4d-market-rules.html

    STI was at 2837. Now STI is at 3246. (Difference +409)

    If I were to buy all the resilient blue chips (highlighted in yellow below) then in 2016, assuming almost equal amount invested per stock, how would my portfolio fare now?


    Time travel to Oct 2017 and
    the results are...

    Shares Price then $ vested Price now $ vested Gain/loss
    Ascendas REIT 4100 2.44 10004 2.66 10906 902
    Capitamall Trust 4600 2.17 9982 2 9200 -782
    Jardine Cycle 300 39.55 11865 39.82 11946 81
    SATS 2600 3.91 10166 4.66 12116 1950
    SPH 2600 3.92 10192 2.71 7046 -3146
    Thai Bev 13000 0.77 10010 0.9 11700 1690
    Wilmar 3100 3.21 9951 3.2 9920 -31
    TOTAL 72170 72834 664

    Negligible capital gain. Becos one rock sunk the ship. Image result for defeated emoticon


    Could have done better by buying the STI ETF!
    (Those who bought the banks really hit home run. LOL)


    Moral of the story

    Do not buy simply based on the company's resilience in a down market. Do look at the company's earning prospect, forward price trend and overall sentiments.


    How many of the blue chips are still stalwarts? It's for you to decipher.



    *** Disclaimer: I have no vested interest in the above stocks.

    Tuesday, 1 August 2017

    Random talks and thoughts

    Person A: If (paint a beautiful picture), then you can (do what I want)?

    Miss Logical: If it is something that is NOT happening now and may not happen in future, how can I do (what you want)?

    IF is based on the assumption that something may happen. Excuse me, but I am talking about the situation NOW.

    ---

    Person A: When (paint an ideal scenario), then you can (do what I want)?

    Miss Obstinate: Err... how is that different from just now the 'if...' that you said?
    Ok nevermind, so WHEN that happens then you tell me to go and do ok?

    ---

    Person A: I will give you A, B, C, D... (dangle candy).

    Miss Tell-me-now: *roll eyes* Yeah that only happens now when I want to say goodbye.
    Thank you but no thanks.

    ***

    Sunday, 23 July 2017

    When patience is essence

    Don't over-analyze news but they are good to know.
    Price movements and trends are not for show.

    Every blues chip has its prime.
    Albeit all at different time.

    Waiting and waiting is no fun.
    We shall see when will the bull cease its run.

    ***

    Sunday, 18 June 2017

    Why I don't play in overseas stock markets

    Despite home biasness and possibly missed opportunities by only investing in SGX stocks, the big deterrent for me to dabble in overseas stock markets are the additional costs of trading and holding the foreign exchange's stocks. See https://the-international-investor.com/international-stockbroker-list/singapore-stock-broker-list

    Trading commission + nominee service fees (custody fee, admin charge etc) + FX fee + withholding tax on dividends

    And of course... I am just too lazy to monitor other markets. If I want foreign market exposure, buy shares of companies with stakes overseas lo.


    Can anyone convince me otherwise about buying stocks from overseas exchanges?



    Friday, 26 May 2017

    I work best when my boss is not around

    Why?
    • I can work at my 'own time, own pace' at researching, planning and implementing new projects, rather than having to keep fine-tuning things that are already in place.
    • I get motivated by stories and visions. Less so by money and in-between kind of power. Anyway since I am not doing sales, technically speaking, I have less 'rights' to ask for higher pay / monetary rewards.
    • Boss likes to micro-manage and correct things down to the details, so there are often draft after drafts.
    • Boss likes to change his mind frequently.
    • When I am stressed with too many little things (multi-tasking over stretched), my work efficiency drops as I will then 'forget things'.

    People don't quit because of the job.
    People quit because of the boss. 

    Sunday, 14 May 2017

    OCBC repurchases share from market

    "Oversea-Chinese Banking Corporation Limited (SGX:039) commences share repurchases on May 9, 2017, under the program mandated by the shareholders in the Annual General Meeting held on April 28, 2017. As per the mandate, the company will repurchase up to 209,124,917 shares, representing 5% of the issued ordinary share capital. " 

    That may be one of the reasons why its share price was heading up in the past weeks. Its price was downhill when I bought, finally it is making a turn. In one of my previous posts I was lamenting that I should not have reinvested my dividends as shares. Lol.

    DBS has shown a fantastically whooping >20% increase in share price from last year.


     Is it time to eat the cake? Hmm...

    All I know is that we can never get our timing 100% right, if we are 70-80% right that is already very good hit. Even when I time my entry to DBS I also didn't manage to 'buy at the lowest'.

    Buy LOW, sell HIGH. The logic is very simple. Yet somehow we seem to have guts and gut feels that defy the brain's logic.

    Some MA and MACD for you?

     --
    DBS disallows the transfer of money to Vickers on Sunday. Yikes, irritating.
    Nevermind, let's move on to get some inspirations on a Sunday. TGIS :)


    Wednesday, 26 April 2017

    It's harvest time again

    Here comes the time of the year for harvesting dividends. Yay!
    I wonder if that is why people 'sell in May and go away' other than the summer holiday...

    Just a refresher on what is ex-dividend date:
    http://www.investopedia.com/ask/answers/06/exdividenddate.asp

    Where can you find the ex-dividend date on SG stocks?
    Here http://www.sgx.com/wps/portal/sgxweb/home/company_disclosure/stockfacts
    Find the stock and click on the Dividend tab.

    --
    I shouldn't have sold some of my Keppel shares so early on the rebound and now I missed those dividends. Even though Keppel's dividend has been going south, it's better than nothing since my holdings are still in the red.  THAT is the problem of buying on the decline. Why I didn't go and read on Trend Trading earlier? Sigh.

    Sunday, 16 April 2017

    Thought processes & problem solving

    I finally discovered how to utilise pivot tables for data analysis. It looks cheem to me when I first looked it up (I only know pie charts and line graphs for the sake of presentations), until I discovered the 'woah' moment with trial-and-error and things suddenly fall into place like magic. 
    Not without some data chewing that was quite frustrating initially as I have 800+ lines of data with assorted information such as timing, category etc.

    --
    When it comes to problem solving, many times we tend to fall into the trap of focusing on 'What I can do?' instead of "What is the ideal solution to this?". If there is more than one possible solutions, choose the best one. The best pick should be the ideal solution to the problem, although that may not necessarily be the most achievable. 

    With that in mind, we proceed to brainstorm on 'HOW to achieve it'. During which we can list down all the possible methods and pathways.



    When problem solving starts with "What can I do?" before everything else, we set a limit on the possibilities based on our current ability. It is like looking through a peep hole instead of opening a door to the solution. When an action is taken it may lead to taking a roundabout path, winding around with no end point in sight or circling on the same spot. At times, it will make us want to 'escape the problem' because 'I just can't do anything about it'.


    So instead of 1, 2, 3 in the above flowchart, it became 1, 3, stuck.

    We need to keep our focus on the solution / outcome and be as specific as possible.

    The complete cycle of problem solving in a clear picture:
    Source: http://www.humorthatworks.com/learning/5-steps-of-problem-solving/


    --
    Back to my problem. I have to first see what are the data I have on hand and which part of it to analysis so that I can draw a conclusion for my boss on this question xxx. 
    In order to analyse it, how should I organise the data. Then I ask what is the most efficient method to display the results and give the answer.

    The formula - no need formula. Just pivot table.

    Actually that is not the end to the problem, it's only the end to my data analysis problem. 

    Back to the problem solving cycle. 😫

    Saturday, 15 April 2017

    Insights from interviewing candidates

    Being the sai kang Ops Manager, my new add-on duty currently is to hire for a HR generalist position for the company I am working at (before I get a new add-on duty of HR manager too). Here are some interesting takeaways from the interviews I have conducted.

    1) Those who don't know how to give 'model answers' for the standard questions asked, I know they have little or no experience in interviewing and recruiting people, as well as being interviewed.

    "What do you know about our company xxx?" *stumped* 
    "Thank you, exit is over there."

    2) "What makes you leave your current position?"

    Ah, I have to watch out for complainers. Those who talk a lot of 'bad' stuff about their current work. You know? I know.
    Most standard answer - "I want a change of environment / industry." (The nicer way of saying I don't like my current workplace.)
    Ok... so what kind of environment are you looking for? What makes you want to join our industry? Many of them don't have a clear answer.

    3) "What makes you state your expected pay as such, which is... $xxx more than your last drawn?"

    One epic answer was -
    "From what I observed in the candidates that applied (this person works in a recruitment agency), typically they will put down a 20% pay increment for expected." (WL, this I really don't know wor. Shhh... am I being short-changed? Cos I always put less than 10% rise in my expected! =.=)
    My reply in my heart was -
    You are most welcomed to price yourself out of the market.

    4) I have not seen a single applicant who graduates from either NTU, NUS or SMU specializing in HR. Rare breeds?

    5) The candidates can write in perfect England when they send in their resume and cover letters, BUT somehow the writing standard dropped drastically when tasked to write a simple paragraph of answer.
    -

    Sometimes I just switched off in the midst of the interviews...

    Somehow, I think I am not quite a seasoned interviewer as I have been asking mostly standard questions. Any 'old ginger' around who can share some tips on effective recruitment and interviewing?

    I am so guilty of not blogging any financial stuff these days, no time for more financial learning. Haiz.

    ***

    Sunday, 5 March 2017

    幸福

    不要羡慕别人的幸福。

    因为在这个世界上,你看不到的不幸福比你看得到的幸福多许多。

    不相信?打开电视看一看“童工”。

    你说世界永远不公平。是啊!


    Count your own blessings. 你的幸福不一定和他还是我一样。

    知足常乐 - 那就是幸福。:)

    Monday, 20 February 2017

    Unattractive Lunar New Year bank promo

    Till end Feb...
    The only low-hanging fruit promo that I could find is the DBS $28 Hong Bao giveaway for opening a new deposit account or SAYE account online. T&C applies. So I have gotten myself a Multiplier Account.

    POSB is offering 1.45% for 4 months if you open a higher interest account with fresh fund deposit. Last year was 8 months.

    Standard Chartered is offering a miserly 1.15% for 11 months FD tenor with minimum deposit of 25k. (If I didn't recall wrongly, new year period was 1.25%.) https://www.sc.com/sg/save/term-deposit-sgd-dollar.html

    CIMB is offering 1.25% for a 12 months FD tenor with minimum deposit of 20k. https://www.cimbbank.com.sg/en/personal/news-and-promotions/promotions/accounts/cimb-sgd-fixed-deposit-promotion.html

    Maybank's FD rates have also dropped markedly versus last year.

    Where would be a safe haven for parking spare cash at a better yield this year? Bonds?

    ---------------------
    19/4 - Yay, gotten the $28 hongbao from DBS! :D

    Sunday, 29 January 2017

    Sequel to CAGR, XIRR simplified

    A sequel to my previous post.

    Can I make use of XIRR's value to help in my investment portfolio goal setting?

    Think come, think go... cannot leh. :(

    WHY?

    Because XIRR % is like a report card grade which shows how my portfolio has performed over a fixed period of time, say last year. However, it is not practical to set a goal based on the % or confer a meaning to it as the current market value of my portfolio is controlled by Mr Market (although you may argue investment timing matters *cough cough*). So on sunny days, XIRR is good and on rainy days, XIRR is bad.

    Notwithstanding the fact that data punching is going to be tedious for the value to be accurate. Diligence... hmm...

    Before I put XIRR completely out of picture...

    XIRR calculation might be meaningful IF you want to compare some 'investment products' like structured deposit, RSP, Investment-linked insurance or unit trust to see how well their returns fair against stock, ETF or simply inflation within a fixed time period. (I should do that for my POSB Home Balance Fund!)

    Another use for it - if you have been actively injecting cash into Investment A and did not inject / inject cash at different intervals for Investment B, you could use their XIRR figures to give you an objective idea of how your Investment A's annualized return compares with Investment B's.

    You could also use XIRR to compare your overall portfolio performance last year versus this year. So you can chart a Y-O-Y XIRR hehe!

    In my conclusion, the XIRR figure is not very useful on its own but is good to use as a comparison data. Do let me know if you have a different opinion. :)

    ***

    Saturday, 28 January 2017

    CAGR, XIRR simplified

    Inspired by SMOL's post, I decided to do some reading and a short post on these "cheem cheem" terms that previously I do not use.

    CAGR stands for Compound Annual Growth Rate. It is useful in measuring (in %) how much an investment has increased in value over a fixed period of time.

    Watch the illustration in this video here - http://www.investopedia.com/calculator/cagr.aspx 

    So if your investment grew from $1000 to $1500 over a period of 3 years, the CAGR is 14.5%. Which means the amount increased by 14.5% on its compounded value each year, as follow
    Year 1: $1000+14.5%
    Year 2: Year 1 compounded $$ + 14.5%
    Year 3: Year 2 compounded $$ + 14.5% = $1500

    This is provided no fresh fund is injected into the investment (the investment compounds itself) over the three years. So if investment A returns 14.5% and investment B returns 10%, obviously investment A is doing better and probably worth investing more money in going forward.

    The problem is... we do not compound the returns back in all our investments. We may choose to take out the dividends and spend them on other things instead of reinvesting in that same portfolio. Therefore the dividends will not contribute to part of the CAGR and using this formula is not accurate or useful. Just a simple comparison of annual return rate is good enough for determining which investment is a better deal.

     --------------

    XIRR is just an excel function. It calculates the Internal Rate of Return for a supplied series of cash flows (i.e. a set of values, which includes an initial investment value and a series of net income values). Unlike the Excel IRR function, the series of cashflows for the XIRR calculation do not necessarily have to be periodic. [Reference: http://www.excelfunctions.net/Excel-Xirr-Function.html]

    What is 'Internal Rate of Return'?

    Internal rate of return (IRR) is a metric used in capital budgeting measuring the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. [Reference: http://www.investopedia.com/terms/i/irr.asp#ixzz4X2D9IKCg]


    Don't understand what the above means at first glance?

    Me neither. But wait...

    We need to first understand what a formula or tool does, in order to use it correctly.
    If don't understand, then mai serng (don't calculate) lor!

    But my spirit of never-give-up prompted me to do some experimentation on excel. And wallah! I found out that XIRR is a function that can calculate the CAGR mentioned :D

    Amount($) Date
    Initial -1000 01-01-15
    Final 1500 31-12-17
    XIRR 14.47%

    And it can factor in cashflow. E.g. contribution (negative) and withdrawal (positive) amounts from EXTERNAL source throughout the investment period in calculating the annualized return rate.

    It can also factor in TIME...

    Initial -1000 01-01-15 Initial -1000 01-01-15
    Injected -100 01-01-16 Injected -100 01-09-17
    Final 1500 31-12-17 Final 1500 31-12-17
    XIRR 11.23% XIRR 11.77%

    Because time holds value*, $100 injected at a later timing gives you a higher return rate at the end date than $100 injected at an earlier timing even though your final values of investment at 31 Dec 2017 are the same.

    *Your $100 not invested can be used to do something else before you invest it here to give you X returns.

    The more money you inject throughout the investment period which gives you the same $1500 return, the lower the annualized return rate. Say if at any point in time you injected $500, and your return at Year X is $1500. What would be your XIRR value?

    Answer: 0%

    Duh!

    Cos you didn't yield anything from the original capital amount throughout the investment period.

    Hope this post managed to shed some lights for those who thinks that CAGR and XIRR are too cheem for you. May we all yield high CAGR and Huat ah in the Rooster Year! =)

    ***
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