As such, I decided to calculate my portfolio performance vs the index and I have been spending the past few nights to calculate the transactions for the past 10 years.
The calculation method used is the 'Unit Value Pricing' method. I first came across this method in the Valuebuddies (previously known as Wall Straits). There's still some old posts back in 2011 found here.
I've also found a reference in the CFA level 1 under 'Performance Evaluation: Rate of- Return Measurement'
I have been using XIRR in Excel to compute and I will still be using it as it is much easier as I just need to enter the transactions and Excel will auto-compute this. As such, I have never gotten around to compute this using the Unit Value Pricing as it is quite tedious until this circuit breaker affords me some time to do so. However, I find the Unit Value Pricing much more intuitive to understand as it mitigates the effect of cash injection and withdrawal such as through stock purchase, sales, dividends, rights etc. In addition, I can compare this with the benchmarked index for an apple to apple comparison.
Since inception in 2009, my portfolio has an approximate CAGR of 12.7% vs STI ETF of 3.46%
If I look at the past 5 years approximately, my portfolio has an approximate CAGR of 1.63% vs STI ETF of -5.95%
I choose to include the recent bear market prices as I think it reflects the reality better as I don't want to be cherry picking the good times solely. If I select 31 Dec 2019 as my end date for my calculation, I'm sure the CAGR will be much better.
After computing the above, my thoughts are that it's alright that I've managed to beat the index going by the above charts. I guess buying undervalued stocks of companies with good fundamentals gives some alpha. However, it offers scant relief as the past few years performance is dismal even if it is positive and better than the index. My funds would have been better off being invested in DJIA, S&P 500 or the MSCI World Index Fund such as the IWDA ETF.
In addition, I believe my portfolio performance is not as good in the past 5 years as compared to the first 5 years due to the increasing number of stocks in my portfolio and perhaps my stock picking skill has stagnated over the years.
As such, I have decided to keep my local portfolio to be focused on yield. Given the current downturn, it is easy to purchase excellent companies and REITs at high yield of 6% or more. Partly, I come to realize that Singapore's economy and stock market are mainly driven by the establishment such as banks, GLCs and REITs. Our economy has been weak in terms of innovation thus we do not have any likes of Google, Alibaba, Facebook etc. thus growth will be hard to come by.
A part of my funds are now diverted to other markets in the US and HK to pursue growth instead and I have been deploying a significant amount of my funds for the past few months and will be continuing to do so.
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