Trying to understand if my investment portfolio growth over last 7 years is “good”

[raccko]

Hi there

I was looking at my HL S&S ISA which I’ve had for the last 7 years or so and have been actively putting money into it.

For the past year, I’ve been putting £600 in per month and previously would mostly put lump sums in. Without saying the portfolio value sum (I hope not necessary for this q), but the total gain or loss is +38%

The portfolio is compiled of mostly funds, some equity positions and to be honest, I feel like a couple years ago I saw the value of the portfolio around the level it is now (even though I have put many thousands into it since).

My question is, let’s say it’s a 7 year timeframe in which I’ve been putting money into this portfolio, does a return of 38% seem decent?

Recently I have been putting money into very popular simple Vanguard S&P 500 / all world / emerging market funds.

Any guidance would be greatly appreciated!

Many thanks!

 

[julia736]

@raccko

Recently I have been putting money into very popular simple Vanguard S&P 500 / all world / emerging market funds.

Why in those instead of the other HL funds?

You should understand what you're investing in.

Watch Lars Kroijer's short video series and read his book or Tim Hale's Smarter Investing.

 

[sashieng]

@raccko No idea.

We do not know what you have invested in.

We do not know how long you have held distinct investments?

We do not know your attitude to risk (volatility).

 

[shadow2]

@raccko That's about 4.75% annualised, so not fab, not terrible. £1 of goods in 2016 would cost £1.31 now, so you're slightly ahead of inflation, which is a plus. Ultimately it's subjective, if that mix of investments was the right thing for you at the time (balance of risk appetite) then fantastic.

 

[jtanurdjaja]

@shadow2 That's not correct as they've put in money over this period and the annualised rate could be over 9%.

Your calculation is only correct if they put in all the money seven years ago and nothing after.

Without telling us exactly how much money was put in when it's impossible to calculate an annualised rate.

Having said that putting your money in an index fund is the way to go.

@raccko, please take note before you decide to sell all your holdings.

 

[shadow2]

@jtanurdjaja Yeah, it was an indicative simplification. It would also be correct from a portfolio perspective if the new contributions had been held in cash and drip-fed in, assuming negligible cash interest being earned.

Any insight people suggest would only be appropriate given the lack of detail available to us.

 

[raccko]

@shadow2 Yeah when it’s put like that, it doesn’t seem so good. For me, the main thing is about how my portfolio value was once the level it is now, thousands of £ ago…meaning the value went down (potentially due to all the economic issues we have in the world right now). So hopefully if it can come back to the levels of before, then the value should sky because of the extra £ I have invested anyway. Maybe that is wishful thinking…

 

[loveyoulord]

@raccko Hoping for the market to do better isn’t a strategy. The market (especially the US market) has done extremely well this year with the Nasdaq and s&p 500 beating out the losses from the previous couple years and the Dow making an all time high (I mostly trade us market and people usually suggest US indexes).

If your plan is basically ride the market (aka investing long term and not following market news), then the 5% ish yearly growth isn’t bad, depending on what you are invested in (keep in mind that this is about the estimated growth for a conservative pension plan). You can always buy into sectors that you believe in more, such as tech or property, but that carries more risk for more upside.

The rule of investing is you should always have a goal in mind. If you are doing it because you were told it was what’s best, you need to do a little more reading. Also you haven’t made or lost money until you have completed the trade, so paying attention to the daily, weekly, or monthly swings aren’t very beneficial unless they are from executing trades.

 

[julia736]

@raccko This is short-term thinking.

We know it will return to its current value, we just don't know how long it will take.

And that's kinda backwards looking too - the only thing that matters is how to earn the highest returns going forwards, that's compatible with your risk tolerance.

You need to understand what you're investing in, otherwise you're just fumbling around blindly and you won't even know what cockups you're making (have made already).

Understand the basics of investing and you'll be set for life - reading Smarter Investing will take you an hour or two a night for a week or two, then you'll know more than most of the plonkers here and you'll know what the answer is.

 

[wonderwhy]

@raccko Yes portfolio value is important. £600/month on £1k starting vs £600/month on £1m starting will drastically change the amount new contributions affect total gain.

What is the return of the actual investment rather than your personal return? Compare that to the S&P 500 or similar over the period, usually a good benchmark.

It probably is around where it was two years ago, December 2021 was a high that is just being beaten now in the US for example.

 

[sml83]

@wonderwhy This is the correct answer, it’s pointless asking if you’re only going to give half of the question; how is anyone supposed to know how good the return is?

If you started with a million in the bank then it’s decent, if you started with £100, deposited £50k over the last 7 years, and ended up with £138 then you’ve had an awful time.

 

[shadow2]

@sml83 I don't know what investment app you use, but all of the platforms I use calculate your personal rate of return to include the contributions you've made. When OP says their portfolio value has achieved +38% I'd bet that means on top of all the money they've invested, not on top of their starting position. Otherwise everyone DCAing would say their portfolio had doubled after a month, which would obviously be an exaggeration of their returns.

OP doesn't need to reveal their portfolio value in order for people to reflect on whether +38% over 7 years is good or not.

 

[jykond]

@shadow2 Yes but there are still different methods to express that percentage return.

Vanguard uses a money weighted rate of return to account for the increasing size of the pot over time.

My workplace (Standard Life) pension doesn’t - it just gives the % growth as a proportion of the pot. This means gains early in the product life when the pot is small are vastly outweighed later on as the total pot becomes larger.

In the second example, if you tried to calculate annualised returns from that percentage you would get a misleading number.

If they are using a crappy method to calculate returns then the starting value matters.