Category: Investment returns

I don’t expect you to grow, Mr Bond, I expect you to yield

FIRE v London2 Comments

So, no sooner have I completed my trade – topping up a bond ETF – and duly entered it into my blog’s diary, than I see Monevator has just published a post announcing the bond crash. No wonder I observed that my bond ETF is trading near 3 year lows; have I just caught a falling knife?

I don’t expect you to grow, Mr Bond, I expect you to yield.  I have held Bond, JNK Bond ETF to be precise (SPDR’s ETF of US high yield bonds), for years.  It has weathered the occasional storm extremely well.  It has spat out dividends of over 6%, with cashflow occurring every month.  And its share price has stayed within a very tight range – $38 to $42 – almost entirely over several years.   Some of my holding here has been in a leveraged US bank account, where I am paying <2% for my margin.  Receiving 6% while paying <2% is obviously free money, but I am running higher risk; given this risk I particularly value the low volatility on the ETF price.

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My returns since 1/1/2013

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I plan to post my investment portfolio returns on this blog, for others to monitor progress and see how my investment approach pans out in the real world.

I’ve just published my Returns page.  It has monthly returns since January 2013 (when I started tracking my investment portfolio in a consistent way).  I also show how an initial investment of £1m would have grown with these returns.  Over the two and a half year period tracked, my returns are a pleasing double digit number; this is surprisingly high for me, as over a longer time period I expect them to average high single digits.

The eagle eyed will notice I also track my Sharpe ratio and my worst drawdown.  Both of these are measures popularised (?) by hedge funds.  The Sharpe Ratio is essentially a way of normalising for risk; it expresses the return in relation to the volatility.  A higher Sharpe ratio represents more return for a given level of volatility; thus higher is better. The worst drawdown tracks the biggest ever sustained loss; bigger is worse.