Sunday 19 August 2012

Are You Keeping Up With The Joneses?

Some US Joneses?
Judging yourself by the absolute returns of your portfolio is OK up to a certain point - for example, you probably want to beat the loss of value due to inflation - but it makes more sense to compare yourself to other investors.

An interesting new tool has been developed by InvestorBee, a new online investment company, on how to compare risk and performance (for UK investors), as well as giving some data on how private investors have performed.

As reported in This is Money there are now some useful benchmarks for comparing the performance of your portfolio with those of other UK investors: these numbers are based on the real returns achieved by 1.4 million British investors.

InvestorBee's figures show that, over three years and with fees taken into account:
  • the average investor with 97% of their portfolio in shares and other high risk assets, such as property and commodities, grew £100 into £136
  • those with only 81% in those riskier assets - and the rest in cash and bonds - grew their money to £127
  • investors in cash achieved relatively low returns, ending up with only £105.
Although the InvestorBee site seems to be mainly about choosing which funds to invest in - and I don't recommend this type of investing - this comparative information on other UK investors is new and quite interesting.

So, taking the average high-risk investor return of 36% over 3 years, how does the DIY Income Investor portfolio compare? Taking the 3 years from August 2009 and excluding new capital additions, the total return (i.e. income + capital gains/losses) is around 40%, so quite a reasonable result compared to the InvestorBee high-risk benchmark (and this is a tax-free return, of course). However, I don't think that the portfolio is actually particularly high risk overall!

Anyway - I think the Joneses can feel well kept up with. Or something like that.

Are you one of the Joneses? Or one of those trying to keep up?

[Update Jan 2013: It seems that InvestorBee did not survive the launch!]

I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.

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