Market Performance

I was wondering what is a true measure of Market Performance,
S&P ASX 200 Price Index or
S&P ASX 200 Accumulation Index (includes dividends and capital growth)?

Should Managed Funds be measured against Accumulation Index rather then Price Index?

What is your opinion?

See link http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/IndicesMainPg&r=7
and clik on "Understanding Indices" page 7 for a comparison of the two indices.

Tropo

 

Great Question:

I will get back to this over the weekend . . . but comments from the group prior to then will be welcome.

Regards,
Steve

 

IF the type of Managed Fund can practically receive the full benefit of the dividends, then I would have thought the Accumulation Index would be the better 'apples with apples' comparison for actual 'performance'.

For example, because the NavraInvest Fund is constantly in and out of shares, it may get a reduced dividend benefit and therefore the Accumulation Index may be a bit tough. On the other hand it does get some dividend return.

If you were looking at some individual days, where dividends hadn't been received that day, saying the Fund went up 2% and the Index went up 1% may indeed give a fair enough comparison on that day. On other days however, or over different periods, dividend payments may be received and this would then distort the comparison.

I guess it depends whether the index vs fund performance comparison is indeed being used as a real performance comparison or really as an agreed way of implementing a performance type fee. For example, I see the NavraInvest one as the latter. If I was looking at 'apples for apples' performance comparison I would probably use somewhere in between the Price and Accumulation Index in this instance.

 

Funds Measure:S&PASX200 -v- S&PASX200 Accumulation Index

It seems to me that funds generally distribute some (complex) component of the income and capital gain, so there is generally not an "accumulation" effect that is directly analogous to the accumulation index in a fund unless you are reinvesting the distributions. Even then, there is probably not a direct correlation as such, dependant upon the way the fund trades, distributes etc.

 

**Bump**

Hi Steve.

Realise you've probably been busy but it would still be interesting to get your thoughts on this one when you get a chance.....


Thanks.

 

Hi Steve,

Since you are back with us. Could you plaese give us your opinion on the issue?

Thanks

 

Hi,

A capital growth fund with dividends will usually be measured against the accumulation index.

An income fund too will generally also be measured against the accumulation index.

In fact most funds should be measured against the accumulation index . . . why?

Simply because of their mainly buy and hold nature, with a distribution of dividend.

What about Dollar Cost Traded funds?
An actively traded fund (DCT) that distributes realised profits (Trade profit plus dividends) should be measured against the price index.

Reasons:
1) Each distribution is 'locking in' your gain. In other words, if the market collapses the next day or week, the portion you have received by way of the distribution will NOT be affected. (It might have been utalised to pay down non-deductible debt etc.) Also, as is currently the case the distribution could be used to purchase new units at the reduced price.

Example: 5.80c per unit

200,000 units at 5.8c distribution = $11,600 (From units valued on distribution at 1.18 = 9830 units)

Re-purchase new units at 1.08 = 10,740 units. (A gain of 910 units )

It is this gain that compounded, offsets the accumulating portion of indexed growth.

2) As Alan correctly stated earlier in the post, DCT will have reduced share balances when the market is high. (More into cash) and thus the conventional dividends will be less. It would thus not be an apples with apples comparison to use the accumulation index.

Regards,
Steve

 

where on the net can i find daily accumulation index figures.
So that I can figure out ytd gain of the asx accumulation index?
thanks

 

Pumping money back into the wholesale fund

Steve,

I have been contemplating purchasing a property in Melb but due to the fall in the share market and perhaps some volatility in the future, is it a good time to pump money into the wholesale fund with my ears pinned back??

Bob

 

Aw Bob,

What a tough question for me seeing that I love shares and the fund is going so well

If you can find a property in Melb within Rental Reality pricing (And all the other criteria) then property first, followed by shares.

Reason:

BETTER LEVERAGE . . .

Property at 80% LVR growing at 5% pa > shares at 50% LVR (margin) growing at 15% pa over 5 years.

$100,000 plus 50% leverage allows you to buy shares for $200,000

$100,000 plus 80% leverage allows you to buy property for $400,000 ($20k for costs)

$200,000 growing at 15% for 5 years = $402,264
$400,000 growing at 5% for 5 years = $510,507

Buy the property!!

AND . . . value add with shares

Regards,
Steve

 

property v shares

Will do, maybe two. I'll give Michelle a ring. Thanks Steve

Bob

 

DKMC

Try the link I posted above. Browse the site and you should find it.

 

Steve,

Thanks for your answer. It is more or less what I thought.
I was just ....curious.

 

I still cant find it. On the site it says it is no longer available but you can get it on the index watch section which requires a paid subscription.
Anyone know of any place on the net to get the accumulation index figures

 

Hi dkmc,

I think this might be what you are looking for:
http://www2.standardandpoors.com/se...=4&b=10&r=7&l=EN&vqt=accumulation+index&vns=1

Regards,
Steve

 

What you measure yourself against is entirely arbitrary.

For me with Aussie equities it's the accumulation index all the way, we love our dividends in Australia and if you have a look at the compounding difference between the XJO and accumulation index over time then you might have an eye opening moment.

For me the only important measure is absolute return, and I want my returns to be as close to zero correlated with the markets I trade as I can get. Acceptable risk moderates what you can consider as achievable returns as well.

Last time I heard Steve stated the fund fits in with his entire strategy of distributing cash flow for -ve geared property, and a figure of 10% was mentioned.

I don't understand Steve's explanation personally, I mean the shares traded will still recieve their divs on exdiv date. Still I don't hear anybody complaining about the level of fees they are paying to NI at the moment

 

I haven't found a free source for daily data yet.

ASX200 Accumulation Index

This site has monthly data, though I haven't checked their accuracy.