A Performance Summary (AU Portfolio)

I have experimented with a number of approaches since purchasing my first ever stock on 6 November 2012 and of course have become more knowledgeable over time. (In case you are interested, on that day I bought ANZ, BHP, NAB, WPL and WES - boring I know, but perhaps for the best given how clueless I was back then.)

I have used internal rate of return (IRR) as my measure of investment performance and this is similar to the annualised Sharesight methodology. Both these methods differ from the time-weighted approach used by fund managers. The key difference is that dollar-weighted calculations such as IRR are more sensitive to the timing and magnitude of investments. For example, if you are putting relatively larger amounts of capital to work during a bull-run (as has been the case in my investing history) then your dollar-weighted returns will significantly exceed your time-weighted returns. This is not to say that one method is superior to the other and those interested in digging deeper may find this analysis helpful.

The reason that I chose IRR is that my trading account links directly to my day-to-day spending account. Therefore, the account registers lots of cash movements and so to accurately calculate time-weighted returns I would have to reconstruct my portfolio position for almost every trading day in the past six and a half years! My broker does not provide me with such information meaning it would be a manual process. Life is too short for that.

The IRR of the AU Portfolio since purchasing my first ever stock six and a half years ago is 33.6% (before tax and including franking credits).

I will only be providing sporadic performance updates from now on as too much focus on returns is detrimental. There is an emotional tax to pay and little meaning to be gained over short periods.