DDU’s Investment Performance

By | January 29, 2018

Author: Mr and Mrs DDU.

Disclaimer: Stocks mentioned on this blog are for general entertainment/documentation purposes only, following our own investment journey and decisions. Nothing in this article should be considered investment advice nor is intended to be investment advice. Please click here to continue reading our disclaimer. By viewing any page on this blog you are agreeing to the linked terms & conditions.

Considering what we’re about to talk about, we’d like to re-iterate:

  • This is not investment advice nor is intended to be investment advice.
  • Anything mentioned in this post or any other post is not a recommendation to copy our investments or investing style.
  • Past performance is not an indicator of future performance.
  • We are only doing this post for documentation / entertainment purposes.
  • You have been warned.

It’s now been just over a year since we started investing a monthly amount of money into shares. We feel our investments over the last year are worth analysing because we’re now putting a lot more cash and thought into our buys.

As we have stated a million times on the blog, our aim is to receive more dividend income than our desired in-retirement expenses. At that point we’ll be financial independent and can retire whenever we like.

However, we don’t want our retirement income to be at risk, so we aim for shares that look as though they will sustainably increase their dividend for many years into the future. Essentially, we are also aiming for businesses that can sustainably increase their earnings per share.

Our goal has nothing to do with the index. We are completely index unaware, we don’t have an underlying target of beating the index, but we are going to compare against it in this article – just for fun.

However, we should still be aware of how we’re doing against the index. If our choices are terrible then we may as well have gone with the index.

We have 4 benchmarks that we’re going to compare against:

First goal: Warren Buffet’s 2 rules

Warren Buffett’s first rule is don’t lose money. The second rule is don’t forget rule number one! It’s witty but clever. To us, that means our investments should create positive returns. If they’re negative we’re losing money! Hopefully over the long-term all of our investments are positive. Better than 0% is the lowest, first goal.

Second goal: Beat cash

Shares are often touted as being the best investment over the long-term. That means our investments need to provide returns higher than cash. At the moment the stand-alone bank account we’re using provides an interest rate of 2.8% when you add $200 a month and no withdrawals. If we can’t beat cash we may as well have stuck with cash. The second lowest goal is for each of our shares to provide returns better than 2.8%.

Third goal: Beat the index

As we have already said, we don’t have a specific aim to beat the index but we’ll compare against it for this analysis. To be fair for the index, we will be comparing against the ASX 200 Accumulation Index, which takes into account the dividends. For this comparison we took the starting amount of the index at the date when we purchased each share, so every starting point will be a fair comparison for the share and the index returns. This goal is to outperform the index’s return, whatever percentage it gives.

Fourth goal: Beat 10% annual returns

The long term return of shares has been roughly 10% per year over the decades. This has probably been helped by the reducing interest rate and could be hindered as the rates climb again. Either way, if we can beat 10% per year total returns whilst growing our investment income reliably then we should make very good wealth for ourselves. We think that this 10% goal will be harder than the index, we think the index will struggle to return 10% each year in the medium term. We’ve held most of our shares for less than a year, but we’ll do the comparison anyway. We want to show a return of higher than 10% for each share.

The returns

Obviously each goal gets harder and harder, so less of our shares will pass that benchmark.

So, here are our returns to today (Monday) for every share we have bought since our new purchasing system. The next column shows the accumulation index’s return from the same date as the share purchase to today. The final column shows the outperformance or underperformance.

The first picture is the shares we bought in FY17 and the second picture is what we bought in FY18 up to the end of December 2017.

First goal: Create positive returns

It can be sad viewing looking at a portfolio and seeing returns in the red. Thankfully, only 2 of our 31 buys are negative at the moment. Healthscope is a long term idea for us, so we’re not too concerned that it’s a little in the red at the moment. Arena is our latest buy so it’s not much of a surprise that the share price has moved a couple of percentage points down since our buy.

Second goal: Beat cash

Less than a year isn’t normally enough time for shares to (sort of) guarantee growth in value by more than 2.8%. So far only 5 of our 31 buys have returned less than cash, 3 of the last 4 buys are under that which is completely understandable as they’re only a month old versus a year’s return of cash. Apart from Healthscope, WAM Research is the only one that’s disappointing, we bought it at the wrong time, but it is giving us good growing income.

Third goal: Beat the index

Here’s where it starts getting interesting. 21 of our 31 buys are outperforming the market right now, which is pretty good. Each of our buys are meant to be roughly the same size, as a ‘unit’ of a purchase. Our average performance across all our buys was 18.45%. The average outperformance across all our buys was 11.97% per buy. Our best performance was clearly from Altium, which is part of the game of investing in individual shares. Even if we exclude both Altium buys our average outperformance was 6.02%.

Fourth goal: Beat 10% annual returns

Most of our buys aren’t older than a year, but we will do this comparison regardless. 17 of our 31 buys have returned more than 10% so far, which is pretty good. Hopefully in a year’s time a lot more of them will have grown by more than 10%.

Final thoughts

We’re very happy with how the first year of our investment plan is going, hopefully it will continue as long as we keep making long term investment choices and investing at the right price. As always, this blog is not intended to be investment advice, just sharing our journey and keeping a great record for ourselves to look back on.

Thanks for reading this article about our financial journey Down Under.

Onwards and upwards!

8 thoughts on “DDU’s Investment Performance

  1. dividendgeek

    Your performance is phenomenal. My only concern is we are in the middle of a huge bull market. How would you stock picks handle a bear market?

    Reply
  2. Buy, Hold Long

    Very nicely done, looks like you two have had a very good year in investing. Well done to you both. Keep up the great work for 2018.

    Reply
  3. David Chard

    A bear market will only bother you if you wish to sell. Dividends may reduce but will soon bounce back as they are all strong companies. He may well use the opportunity to buy more shares at a cheaper price!

    Reply
  4. Chris SoonToBlog

    Good job on your performance. Hopefully this gives you greater confidence to continue your investment strategy.

    Reply
  5. Frankie

    Great result for the year DDU! I also like your different ‘levels’ of benchmarks, all useful perspectives to be aware of.

    Are you happy with the relatively weightings of all the stocks in your portfolio given some of the movements over the year? Do you look at the overall weighted return of the total portfolio also?

    Reply
  6. Strong Money Australia

    Incredible job so far!

    10% is a pretty high hurdle these days I think. If that keeps up you’ll be doing extremely well and can start a stock-picking newsletter 😉

    As long as the income return is attractive and expected to increase steadily over the years, I don’t reckon it matters much against the index. We’re taking a completely different approach after all.

    The goal being an ever-increasing income stream. Who cares if the index doubles or halves – doesn’t affect the cashflow and dividends of your/our companies 🙂

    Reply

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