For the scared: calculate avg price- div

I put this under coffe because it’s a bit dumb, but I think I"m doing it anyway.

No matter what statistics says, I always thing about the next crash. Seeing the portfolio going up helps but it’s not optimal. What I like and find easy to remember is the cost of the ETF I bought.
It’s easy to remember for example that the average price of the VT I’ve bought is say 85. I can check the market (VT = 114) and think that the market can go down max 25% and I’ll still be “on par”.
The dumb idea is that I should now get all the dividends I received since the beginning and take their worth away from the average price I paid, this way if I stop buying VT, I’ll see the paid price going slowly down. In an accumulation phase this number should probably help being possibly less scared.

Or just not look at the numbers at all.

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In IBKR you can check performance since inception. So maybe if it’s positive, you will feel better

I keep track of the sum of transfers I made to IBKR and compute the difference with the NLV. This allows me to see the “true P&L” of my portfolio (see the other thread recently on the effect of FX on the P&L displayed by IBKR). I don’t need the “per position” view.

It helped me a bit during the last downturn because I could see that even if the P&L was negative in IBKR, I was actually still in my money (for some time at least).

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I do the exact same thing, every once in a while move the bar of “if you get a -25% crash now you’re still at zero” :slight_smile:

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I personally take a different approach and play „pension fund with Coverage Capital“.

Meaning that I „book“ Total New Investments as „Total Entitlement“ and the Total Market Value (incl. Portfolio’s Cash Accounts) as „Coverage Capital“. For my bookkeeping, the Value of my Portfolio now was the smaller of Total Entitlement and Coverage Capital.

I then every year compare both figures and calculate the „Coverage Ratio“ aka Coverage Capital divided by Total Entitlement. If the Coverage Ratio exceeds a certain Target Buffer (e.g. 40% times Shares Percentage), I increase the Total Entitlement by the Larger of CHF CPI and ~50% of such Over-Coverage. If the Coverage Ratio falls below the Target Buffer, I just increase the Total Entitlement by the CHF CPI.

The effect ist that my Wealth nearly every year increases with at least the CPI. If I wanted, I could as well increase the Wealth with lets say CPI +2% (must be lower than return expectation). I simply don‘t see the Volatility any more. With time, the Coverage Ratio increases to fairly high levels - meaning that even Crashes don‘t hurt my „Perceived Wealth“.

Clearly, that only works in the long run / over decades and it eventually leads to over-Saving. So from a withdrawal point of view, it requires a higher Withdrawal Rate (increased by the Target Buffet) than a normal Investment approach. But the clear benefit is that my Wealth Evolution was fully linear and I sleep very vell at night. The Corona Crash for example lead to virtually no Wealt Impact (think I was down by about 2% or so).

The added benefit is that after a few years, you can invest new funds without any perceived SOR Risk / Timing Risk. If your current Coverage Ratio was 130% and you contribute another 5% to your Portfolio, the Coverage Ratio will go down to 128.5% (Entitlement and Coverage Capital increase by the same absolute amount of these 5% contribution). Meaning that you can the very next day lose ~25% on the new Investment made just right before - but it still doesnt impact your Wealth as such. You are fully shielded from SOR - at least from a mental accounting point of view.

Only downside, suchaccounting best works after ~10 plus years. Reason beeing is that new investments vs. Current Portfolio initially was a very high Percentage and you therefore keep loosing loads of Coverage Ratio due to „dilution“. So you will in the first vew years only see growth in kine with CPI but not real performance. The second challenge is that you need a few strong years to build up a solid coverage ratio. But hey - we are here for a few decades :slight_smile:

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I stopped calculating how much we have paid in into our portfolio and, respectively, P&L. One reason was looking at inflation adjusted values of stocks indices etc. 1000 CHF paid in 2020 was worth more than 1000 CHF now. So, it’s only the current value, and the assets allocation, that counts.

I was thinking to improve my method by adding a 1.5% every year that is the amount I’d get if I had deposited the money I’ve invested. That’s a percentage I know unlike the inflation.

I just track how much I invested/paid in. Pretty easy and straightforward.

Another trick is to look at total net worth. This way the stock portfolio is just a small piece and the volatility is reduced.

They are all nice tricks, but I am forgetful since I shouldn’t check that stuff too much. The single number though… that’s a nice touch in case stuff go south.
It mighit be just a game, since the important stuff happens in the spreadsheet and that’s where I take decisions.

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I gave up “tracking” avg. buy prices since “crypto” with 20+ daily staking payouts etc. Now I’m Bitcoin only and hodl (but take out for buying bigger stuff). Still too much hassle. I have 2 numbers that matter: BTC holdings and CHF holdings. (The rest is just budgeting from paycheck).
Anyway, I’m pretty sure I’m quite positive :smile: rn.

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