My Returns Compared To The Market
My new data addiction and a few hours of spare time have brought to life my latest addition to the blog: A multiline chart aiming to compare my returns to the market across my investments in P2P/
It’ll be all projected against Mr. Market (S&P 500).
My intentions by sharing this chart aren’t ego centred, it isn’t a post type “hello guys I am beating the market look how cool I am”. In fact, I am not after my loss in March 2019, an experience that I won’t take into account in the multiline comparison chart.
I intend to give a clear and quick interpretation of how my investments and types compare to the S&P 500. This is helpful to me and also to those who are getting introduced into the investing world, as you will be able to get an overall idea of what kind of returns you could be expecting once you put your feet in the water. However, bear in mind that past performance shouldn’t be taken as a guide to future performance.
Common types of investments used in the financial independence community
The possibilities of diversifying our portfolios beyond our pension funds are endless. Precious metals? Commodities? REITs? Value, growth or dividend stocks? Crypto? Government, municipal or corporate bonds? P2P lending? Buy-to-let? Art? Or perhaps cash under the mattress like my grandmother did before the financial crisis in 2008? (she was good at timing the market! ;p)
Over the last few months and mainly since December 2018 (blog starting), I’ve learnt about several investment strategies that contribute to our wealth building and can potentially make us financially independent if we stick to our plan in a disciplined way.
Global trackers, Index funds or ETFs, stocks dividends, and P2P lending are among the most popular types of investment used in the financial independence community.
Nevertheless, most investors have a bias towards using an investing strategy or another. Dividend investors aim to become financially independent by building a quality portfolio of stable stock dividends, whereas P2P/B lending investors want to build a source of passive income by lending their hard-earned cash to others in exchange of interest payments.
What I’ve noticed is that it’s quite rare to see portfolios mixed up with many types of investments among the FI community. For instance, have you seen many dividend investors allocating money in the P2P/B lending market or vice versa? What about global trackers? Have you seen many picking up dividend stocks?
That isn’t the case for everyone though, there are a few “locos” left out there like me who put money in every single empty spot they see. That allows me to do a comparison between asset classes among my own investments.
Types of investment in my portfolio
For those who are new to the blog my investments besides my UK pension are as follows:
- Stocks & Shares ISA, where I follow a tax-free stocks and bonds balanced strategy.
- Real estate investments like buy-to-let, REITs and bridge or development loans backed by property.
- High yield European peer-to-peer or peer-to-business lending.
- Stock picking fun account which will become a dividend investing brokerage account.
The split between real estate and P2P/B investments is not perfect as I have mixed types of investments in some of my lending platforms, especially in Grupeer*, where some of my investments are developments loans.
*Grupeer affiliate link
The ROI Comparison Chart
Comments on the returns
We see a clear advantage on my stock picking fun account with a total return over 50% since March 2019. This translates into an annual internal rate of return of XIRR= 101%. If you’ve been reading my blog then you’ll know that this whopping percentage comes from only two stocks: Lam Research (LRCX) and Micron (MU). These both had a nice raise and have been sold recently. I wonder how the total returns would look like if I would have tracked my brokerage account since the beginning.
Nevertheless, as you’ll see on the phone screenshot down below, I timed the stock precisely, buying at a support level, point where the priced bounced back up following a general upward trend (cyclical stock). I consider this as pure luck and I am not expecting this to happen in the near future as I’ll be investing in solid dividend stocks companies with less price volatility as consumer stables businesses that should do OK during a recession. The value of this account isn’t high, 1.6K EUR, which is OK to play around with my stock-picking game.
This is a mobile screenshot before I sold Micron, pure adrenaline! (danger!)
By the way, I use Trading 212 stock brokerage which offers zero commission stock trading service in the UK and Europe.
If you would like to give Trading 212 Invest a go sign up using THIS LINK and we both get a free share worth up 100 $/€/£!
After that, the peer-to-peer and business lending investment type comes next with a total return close to 25% since May 2018, XIRR = 16.25%. The steady performance and high returns on the business loans from Envestio** have considerably helped to proper the returns above the 14% mark.
** Envestio affiliate link. Get 5 EUR cashback and a 0.5% bonus on your investments made during the first 270 days if using my link
Check the performance out at my Envestio Portfolio Page
The last one on the podium is the S&P 500 with a 17% return since January 2019, XIRR=9.4%
I use the S&P 500 as market reference. The data is easier to find online and the difference with the world index isn’t that relevant.
This calculator is also a good tool to calculate past performance on the S&P 500 if interested.
On the fourth place and underperforming the market stays my balanced Stocks & Shares ISA with a total return of 12.3% since March 2018, XIRR = 7.7%.
My real estate investments stand at last place with 7.3% since January 2018, XIRR=5.2%.
It’s interesting to see how high yield loans issued through P2P lending or business platforms are so far outperforming the market according to my data and time frame. The main argument of those investors who allocate money in the fintech peer-to-peer industry comes from a lack of confidence on the future performance of the stock market as valuations seems to be high after a long bull market run.
In my opinion, everyone is good at timing the market, but no one knows how to do it right. Remaining diversified is crucial to me right now.
Albeit the returns on my real estate investments are the lowest I plan to increase my stake gradually, especially in buy-to-let. Rent and dividends from