Govind's portfolio

(Govindarajan) #41

Thanks @Yogesh_s. Yes, I include dividends while calculating NAV and sale and sub sequent purchases are also considered. Even I do calculate NAV almost daily (I skip if there are no actions).

I still feel there is some luck factor and I am awaiting a bear phase and see how I handle the situation. Once I am confident that I am doing decent, I would slowly move my MF portfolio to Equity. Also I have goal based tagging to my MF investments so I thought of not touching it. May be retirement part of that portfolio can be moved to direct stocks. I still feel timing could be the factor. I started off around 2012. So markets gave superlative returns since then. Let us see how things pan out in next 3 to 4 years.

(Yogesh Sane) #42

XIRR and NAV returns are same when there are no cashflows between beginning and ending period. If there are cashflows between beginning and ending periods, XIRR and NAV methods will give you different returns.

NAV method gives you time weighted returns (TWR) or return to strategy. XIRR gives you money weighted return (MWR) or return to investor. Difference comes from timing and size of cashflows. NAV based returns are independent of cashflows. i.e. NAV returns does not change even if there large or small cashflows in the portfolio. This is the correct way for mutual funds to calculate their returns as they do not control when investors buy or sell MF units.

MWR returns take into account timing of cashflows. If MWR returns are less than TWR returns for the same period then investors market timing skills are not good as it indicate investor is generally buying after a positive return and liquidating after a negative return. Similarly if MWR returns are higher than TWR returns for the same period then investor has superior market timing skills as it indicates investor is adding cash to portfolio after a negative return and taking cash out after a positive return.

long term TWR is generally considered as return to strategy as it is the return you are likely to get if you continue to apply the same strategy in the long term. MWR return are the actual returns investor earn as it takes into consideration timing and size of cashflows.

Quiet often mutual fund earn a good return (TWR) but investors in mutual fund earn a lower return (MWR) as they are generally bad at timing the market.

(Govindarajan) #43

I have completed 5 years after restructuring my portfolio and tracking it based on XIRR and NAV method.

Here is the performance.


The portfolio has slowed down and is undergoing time correction and I am sitting at 16% cash. Normally I remain fully invested. I am finding it difficult to find attractive stocks as almost all of them are trading at exorbitant prices. I am finding it difficult to get past this phase of the market.