Statistics & Performance

Since 2015, my portfolio has generated an annualised return of 8.25% inclusive of costs. Prior to this, I held a small number of positions that generated marginal returns – from various notes kept at the time, I believe in the range of 3-4% annualised, but unfortunately, I wasn’t as meticulous with my record-keeping so can’t be more precise. The account at the time was entirely liquidated as part of a transfer to a new broker and during that process, I developed a more precise method of record keeping and performance monitoring due to research which indicated that I was underperforming the broader market quite severely.

To remedy this, I decided to take a much more professional, strategic approach to investing, the first part of which was to establish long-term investing targets, an investment strategy, and regular ‘reporting’ to monitor performance.

Setting my investing targets was a little bit like asking ‘how long is a piece of string’. My starting point was to explore rates available to UK cash savers, which at the time I began investing, sat at 2-3% annual interest. I researched annuity rates (which were slightly higher at 4-5%) and finally looked into historical returns for equities (in the UK, this has been around 5.5% a year since the early 1900s). As such, I set myself a five-year target of 7.5% annualised returns, and a longer-term goal of generating 10-15% annualised returns after ten years.

If I was to outperform a market index, which is a feat that the vast majority of investors fail to do, then I would need a combination of skill, knowledge, competence, and luck. It seemed arrogant to assume that I would naturally have these four things (clearly my earlier performance indicated that I was lacking in these areas) but I believed that with time and hard work I would be able to improve on at least three of the four.

I also had little idea just how hard the challenge was going to be and giving myself a long runway of ten years seemed like a good way to relieve unnecessary pressure and allow time to gradually and carefully build a robust and well-balanced portfolio without taking outsized risks to generate immediate returns.