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Market Performance

Discussion in 'Shares' started by Tropo, 18th Aug, 2005.

  1. Tropo

    Tropo Well-Known Member

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    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 :cool:
     
  2. Steve Navra

    Steve Navra Well-Known Member

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    Great Question:

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

    Regards,
    Steve
     
  3. Alan

    Alan Well-Known Member

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    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.



    :)
     
    Last edited by a moderator: 19th Aug, 2005
  4. gregpatch

    gregpatch Member

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    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.
     
  5. Alan

    Alan Well-Known Member

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    **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.



    :)
     
  6. Tropo

    Tropo Well-Known Member

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    Hi Steve,

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

    Thanks :)
     
  7. Steve Navra

    Steve Navra Well-Known Member

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    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
     
  8. dkmc

    dkmc Well-Known Member

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    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
     
  9. Bob

    Bob Well-Known Member

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    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
     
  10. Steve Navra

    Steve Navra Well-Known Member

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    Aw Bob,

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

    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
     
  11. Bob

    Bob Well-Known Member

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    property v shares


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

    Bob
     
  12. Tropo

    Tropo Well-Known Member

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    DKMC

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

    :cool:
     
  13. Tropo

    Tropo Well-Known Member

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    Steve,

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

    dkmc Well-Known Member

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    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
     
  15. Steve Navra

    Steve Navra Well-Known Member

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  16. Insight

    Insight Brisbane Buyers Agent

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    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 :)
     
  17. Insight

    Insight Brisbane Buyers Agent

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    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.