I was looking the performance charts here: https://www.stockopedia.com/le...
Over the last year, the FTSE All Share index is up 27%, however all the Stockopedia bands are up more than that, the worst (0-10) is up 37.4%, the best (40-50) is 55.2%.
I would have expected some to be below and some above the index.
I'm struggling to understand how this can be.
Yes I did realise the indexes are weighted, maybe that is the reason. Some large caps have done very well in the last year such as £BP. and Royal Dutch Shell (LON:RDSB) but the FTSE is only up about 12%.
I see what you mean now, it also happens with the 2 year charts.Notice the dip around Feb -March 2020, which was when Covid started. That event caused a bear market, and it started recovering around April. Thats when the buyers started coming back into the market, lots of them. That would explain why there was outperformance in all deciles. I suspect this would happen each time a bear market ends and a bull market begins, and a year after a bull market, the graphs would show the same thing.
Well not quite as the All Share index inc. all shares apart from the AIM. But it could be the small caps out perform the large caps in a recovery but this is in the last year. I will look into the small cap indexes. AIM allshare is up about 26%.
If you change the market caps in the link for the last year, than only the larger caps show underperformance and outperformance. The rest, such as small caps, show only outperformance. Each stock, in the stockrank performance charts, probably has equal weighting so as there are more smallcaps and midcaps than just largecaps, that would be reflected in the charts.
Yes - it's due to market cap weighting of the index versus equal weighting of the deciles. So you aren't comparing like for like. An equal weighted FTSE index would be somewhere nearer the middle... unfortunately they don't provide one to us. The median stock has done far better than the All Share in the last year.
You need to forget the top 100: at present by my calculations over 1 year:
MCX up 32%
SMX up 43.5%
AXX up 26.0%
and, as Ed points out, even those are weighted.
The "performance " charts shown by Stocko are nothing of the sort, and in my opinion, have the potential to be highly misleading. Stocko should not be using the term "performance" and if any regulated firm did what Stocko does they would be taken to the cleaners.
The Allshare you are seeing in the "performance" chart is the price performance only, not the total return. All dividends are excluded from the benchmark, and probably the Stocko bands as well. Given some of the special divis that get paid it can be very distorting. Most of the return from the FTSE 100 over the past decade has been income.
Over multi-year periods you lose the compounding of income, exacerbating the problem.
To get some idea of the scale of the disparity, try charting the "performance" of a FTSE ETF (the total return/accumulation class) aganist the index in Stocko....
You can get the money-weighted return of your portfolio quite easily using the XIRR formula in Excel provided you have the dates of major deposits and withdrawals. However, getting time-weighted performance (which is what would be comparable to a fund manager's performance stats) you have to do quite a bit more work and know the value of your portfolio each time there is a withdrawal or deposit. Stocko's Folios can help a bit here if you can bear going through all the corporate actions.
Daily total return stats for the Allshare Index are available if you search online.
Most of the return from the FTSE 100 over the past decade has been income.
For the ten years to 3 Nov 2021, the FT-All Share Index increased by 44.7% and the FT-All Share Total Return Index increased by 106.9%.
But what is the FTSE 100 Total Return?
I suspect most of those dividends are from FTSE100 companies.
FT 100 is up 30.7% over 10 years, the FT-100 Total Return is up 91.2%
Expressed as CAGR then the figures are
FT AS 3.8%, FT AS TR 7.5%,
FT 100 2.7%, FT 100 TR 6.7%
So about 66% of the FTSE100 gains are dividends and compound from dividends?
Do you have any figures for the All Share TR index excluding the FTSE TR 100?
Of course, but that's not the most helpful way to view things. The gdy on the FTSE 100 is currently c. 3.6% and I recall was somewhat higher in the era of higher interest rates. Essentially the total return is the capital (price) return plus the dividend yield. Large companies, particularly in the UK, tend to seek broad stability/inflation growth of dividends and where possible avoid dividend reductions, which are viewed negatively by the market. So even over a period of negative capital return (perhaps due to a fall in valuation multiples) you should still expect a healthy 3-4% pa return from your FTSE 100 dividends. DeWitt's figures show that very clearly.
Those with long memories may recall that in the bad old days UK pension fund actuaries went through a phase of placing a 'long term' (aka off-market) value on their assets using their pet 'dividend discount model', such was their faith in the primacy of dividends. Modern financial economics eventually put paid to that!
Yes, about 60% of the gains of the FT 100 Total Return Index over the last ten years have come from dividends and their reinvestment.
I don't think there is an index for the FT All Share - FT 100 so I don't have the figures, sorry.
Yes Monty Carlo - neither the Stockopedia bands nor the FTSE All Share used as benchmark track dividends. This is all published clearly on the "Rules & Disclaimers" section of the page itself. It's comparing like with like in that regard. I presume you don't believe the results given your tone - but it's all factual and based on equal weighted tracking of the deciles. I see the top decile returns as the effective opportunity cost for discretionary investors.
Dividends would increase the returns to the FTSE All Share, as well as accentuate the returns of the top deciles of StockRanks - the top ranked share sets have the highest dividend yields - and are comparable to the FTSE All Share. If the top ranked set have returned a 2.5% yield or so (mean TTM is 2.89% at the mo) then their total return performance would be ~285% rather than the 222% published over 8.5 years (for annual rebalancing) - the wonders of compounding. That's roughly a 17.2% annualised total return. There are no transaction costs published which are a considerable friction but would roughly equate to dividend gains in a typical sample - so the raw price gains are't far off what can be realised by a disciplined investor.
Total return tracking will be a future improvement and will be weighed up against all the other feature & data requests we have - your vote has been counted. The joy of dealing with monopolies like FTSE is that the pricing of indices can be rather expensive and of course there are a 100x more votes for funds/trusts than total returns.
Dear Ed
My tone comes from being informed by your by your employees that you are working on total return and hope to launch "next year" for over 5 years now at various conference stands....
Have a look at Roland's last SIF article and how he uses the phrase "Total Return" for his stocks all over the place. He then mixes is it with a "performance " chart that probably excludes dividends with no caveat whatsoever? You have a lot of less sophisticated subscribers who simply won't realise.
The "like for like" argument doesn't really hold water I'm afraid - you get large special divis (those where there is no share consolidation after) and some corporate actions where the price return gets heavily impacted but the total return wouldn't. How this feeds into the momentum formulae is another concern.
If you read my "Frustrations with Folios" post in DISCUSS you will see I spent a day loading up some portfolio histories with divis and corporate actions to kick the tyres - only to discover that the benckmark in the "performance" chart wasn't total return. There was nothing in the documentation to warn about that (your staff on chat promised to amend, I haven't checked). It's a great way of disappointing your customers who belatedly realise they've wasted a day?
I'm well aware of the FTSE situation and the data costs. In a previous life I signed off the invoices. There is a relatively simple solution- allow users to load up ETFs of their own choice as benchmarks. That way you get a total return for relative performance purposes.
I remain a subscriber to Stocko and I understand there are constraints - I'm not paying you the $20k that goes to Bloomberg. I would stomach a price increase for total return benchmarks if it meant Stocko could do proper performance. I generally like the product, but I would suggest you avoid using the term "performance" in the website until you can do total return properly. No regulated firm would be permitted to do so and you are entirely aware of this having done the CFA yourself.
Nobody is expecting full GIPS compliance, but I think Stocko could, and should, be much clearer about its limitations.
Regards
Monty
Monty - I do hear you, and I do agree the lack of total return series is a limitation and yes I can understand that that would be frustrating when entering dividends. We do want to create dividend automation in portfolios which would accentuate any difference - so definitely an area to improve.
It's a good idea regarding the ability to choose a total return ETF benchmark instead of the FTSE indexes. We may well switch away from FTSE completely depending on their pricing behaviour - there are actually better offerings from others that are more reasonably priced.
Yes, there are cheaper index providers, but unless things have changed recently very few of them go back far enough for institutional purposes...having said that I suspect very few Stocko subscribers are going to be able to upload more than 5 years of portfolio history?
May I also add (for any 3rd party reading) that Roland has now responded to my request for clarification on SIF returns with perf stats since inception including & excluding divis.
On the ETF as benchmark idea - it has always been a quick institutional fudge until accounts signed off the licence fee, however it is also something that ShareSight have implemented. Provided you let the users do the benchmark security selection the lawyers won't get too agitated...
Ed, like Monty, I get very frustrated/irritated by "promises" that are not delivered, When I first joined in 2013 "total returns" was on the agenda and I ticked a box saying this was important to me. It's still not here. Instead you have invested in other initiatives that presumably gain you more users. But, for me, total return is a key metric for any long term investor. After more than nine years of membership my patience is up. I would rather that you didn't tell us/ask us what is or should be on the agenda/roadmap. Instead I suggest you gently improve things as you see fit and keep your customers that way.
This is the performance history of mid-caps and large caps in the US based on an annual rebalancing... It looks like the StockRanks are not that well defined and segregated, and ALL are underperforming the S&P index... (just before that the only one that outperformed was the 10-20 bracket, 2nd to worst performer is the 90-100 bracket)... I just joined for the trial period but I´m really not impressed
