My Portfolio's Asset Class Returns over Past Three Years

Over the past three years my overall networth has increased by an average of 17.1%pa. However, this is a true "return on investment" figure as it includes annual additions to my savings (via mortgage repayments of principal and additions to my retirement account) of around $30K pa. Allowing for this my overall ROI over the past three years is around 13.7%, which is still very good. My long term target is to achieve a "real" ROI around 5-10% pa.

Comparing my three main investment categories (real estate holdings, stock investments, and retirement account I find that my real estate equity has shown an average rate of increase of only 5.6% pa during this period. Even this figures is inflated as it includes a reduction in my outstanding mortgage of over $15K. I'm not surprised by this result as the Sydney real estate market has been very flat since the last property "bubble" burst in 2002. Fortunately our two properties are in the upper-middle price range, which hasn't fared as badly as the botom end of the market. I expect that the Sydney property market may improve over the next three years as there is considerable pent-up housing demand which is starting to spill over into very low vacancy rates and increasing rents. This improvement may be delayed if there are another couple of interest rate rises over the next 12 months.

My stock portfolio has had a terrific run over the past three years. This is to be expected with the All Ordinaries gaining around 15%-20%pa each of the past three years. Combined with a moderate level of gearing via margin loans my stock portfolio has averaging an increase of 30.7% pa. Stock purchases have probably balanced out with stock sales (takeovers etc) during this period, so this is probably close to the true ROI achieved.

My retirement account has grown by an average of 17.1%pa over the past three years, but this has also been boosted by a relatively high rate of additional savings via employer contributions and salary sacrifice.

For fun I did a calculation of where I'd now be if I hadn't bought the second property and had instead kept the additional funds invested in the stock market. It turns out I'd now have about an extra $200K in net worth and my overall ROI would have been around 17.1% rather than 13.7%. Looking on the bright side at least I didn't liquidate all my stocks back in 2002 and invest in a rental unit, or kept my money in a bank account.

The lesson out of all this is that it generally isn't possible to pick which asset class will do best over the next 3, 5 or whatever period. So it's best to maintain a diversified portfolio spread accross the asset classes, in whatever proportion suits your personal risk tolerance and return expectations. That way you're most likely to achieve the results you want with the least possible volatility in portfolio value.

Copyright Enough Wealth 2007

Google Pagerank Predictor shows poor correlation with PR

I ran a few of the PF Blogs listed by FIRE finance through the iwebtool pagerank predictor tool to see how well it correlates with Goolgle's actual ranking of these sites. As I suspected, there is little correlation. Although there was some tendency for the iwebtools predicted pagerank to be lower for some sites that had a lower actual pagerank, it obviously doesn't replicate aspects of the Google ranking algorithm that had caused some popular sites (such as MapGirlsFiscalChallenge) to had a Google pagerank of 0. According to the iwebtool prediction her site should get a pagerank of 6! Oh well, I guess I'll just have to wait three months until Google updates the rankings again and see if my blog has an improved PR.

The graph below plots actual PR (x-axis) and iwebtools predicted pagerank (y-axis);



Copyright Enough Wealth 2007

How to Boost Your Google Pagerank

Google Pagerank is important if you want your blog posts to appear high on the list of relevant Google search results. As I posted recently, my Google PR had recently dropped from 4 to 2, which seems to have happened to a lot of blogs in the past week or so. In an attempt to fix this I've rejigged by site layout to hopefully regain some PR asap. Google pagerank is apparently only updated every three months or so, so in the meantime I've used the tool available from iwebtool to attempt to predict how my changes will affect my pagerank in future. The tool predicts my pagerank will rise to 6! I don't really believe this, but it's a nice fantasy.

I'll have a play around with the predictor tool and see what it's guestimate of pagerank is for the other personal finance blogs that have recently suffered a downgrade in Google PR (as reported by FIRE finance). Assuming that most of them haven't done a major rejig of their blog sites yet, the tool should predict a future PR similar to their current value (as listed by FIRE finance). If the tool shows most of them with a higher predicted pagerank then that will indicate that the tool isn't very reliable. I might tabulate the results and post about that tomorrow.

Copyright Enough Wealth 2007

The Mysteries of Blogging, Pagerank and Visitor Stats

I think I'll give up worrying about my blog stats. Recently my google PR plummeted (from 4 to 2), and although it's happened to lots of other blogs I really don't know why, so I can't begin to "fix" whatever it is about my site that google doesn't like.

Then, today my feedburner stats is showing that the number of subscribers to my blog feed has suddenly plummeted from 61 to 30. And at the same time my daily visitor count (as recorded by sitemeter) has dropped from around 80-100 per day, down to less than 60 today.

I've no idea what is going on - my recent posts haven't been unusual. And although I rearranged my site to put a second AdSense textlink ad block at the top of my site I can't imagine that this motivated half my feed subscribers to delete my feed. I may need to set up one of the free site availability monitors so I would at least know if there are access problems with my blogspot hosted blog.

All in all, I've no idea how to attract more regular readers or get back my previous pagerank, so I think I'll just stop trying and get back to blogging whatever and whenever I feel like it. The amount of revenue generated by this blog is negligible anyhow, and the time consumed trying to "tweak" the site layout, get links from other sites and publicise the blog via carnivals etc. is more than I spend actually writing posts!

Copyright Enough Wealth 2007