Portfolio Perfomance Update - October 2024

Am I beating the market?

Yes and No, let me elaborate. As of October 2024, my portfolio is not beating the market in terms of portfolio components (stock I decided to pick); this is one more piece of evidence on how bad stock picking is. However, if we look at my investment decisions since I started to invest with this strategy, I am beating the market by 12.5 pp. To better understand what I just said, we need to introduce two main KPIs used in comparing portfolios or funds’ performances TWR and MWR.

Current performances TWR based +41% vs S&P 51.8% since August 2022

‍

Why both TWR and MWR are useful

Time Weighted Return (TWR) assesses the performances of a portfolio without considering my investment decision. My broker's definition: “TWR measures the percent return produced over time independent of contributions or withdrawals. TWR eliminates the impact of the timing of inflows and outflows and isolates the portion of a portfolio’s return that is attributable solely to the account’s actions.” Basically, my investment actions were bad compared to S&P performances.

Money Weighted Return (MWR), on the other hand, is taking into account my inflow of cash, which was very relevant in my case because I had a few stocks dropping in price at the very beginning, so I kept accumulating them. Here is how my broker defines MWR: Money Weighted Return is used to measure performance during the specified report period. MWR is influenced by the timing of decisions to contribute or withdraw funds, as well as the decisions made by the portfolio manager of the fund.

Conclusion

My honest opinion is that the MWR comparison vs. S&P is unfair; I should build a graph for S&P where I simulate the same number of cash inflows when S&P drops, and as you can see, it did. Taking into account also the volatility of my portfolio, I am definitely in a worse position compared with a passive investor that invests and chills.

I strongly advise not to do what I am doing. I really learn a lot from doing value investing, and the country where I live has a very bad taxation for index funds (44%), while stocks have a 10% less, which is probably the only thing that gives me many points in favour. You cannot control your return, but you can control your costs. This is what I did. I am also very grateful to value investing because it gives a huge advantage in my job, especially when there are new business cases to tackle.