Day of Reckoning – ROTH Competition Update

Once per quarter Mrs. Wizard and I check in on our ROTH accounts and compare them on three metrics:

  1. Total Account Value
  2. Total Quarterly Return
  3. Total Return

Whoever wins two out of three metrics wins the quarter. The loser has to clean the fish tank for the next three months. I started out $1,650 behind in total account value because I put that much in a traditional IRA in 2014, so I couldn’t fund the ROTH with the full $5,500 that year.

The scoresheet is published here at the mother ship.

Mrs. Wizard had been beating me pretty soundly for about a year until last quarter when I really rallied and took the yellow jersey back. While she continues to beat me soundly on total account value because of the $1,650 handicap I mentioned above, I continue to lead in the other two categories.

Looks like Mr. SPYder continues to beat us both in terms of our total returns, but we are nipping at his heels. And I beat the bastard this quarter. That’s something!

Comparing our total returns to SPY is stupid, but I keep doing it for some reason.

Since I’ve selected quadruple witching as our quarterly day of reckoning, there is some weirdness about SPY’s share price, since that’s the day it goes ex-dividend. In the past, I looked at two scenarios: either before or after ex-dividend and including (or not) a dividend payment as cash (not reinvested) accordingly. Eventually I decided to just pick one way to calculate it. That way the weirdness should come out in the wash.

So this is how I calculate the SPY quarterly return: I take the closing price the day before ex-dividend as the starting and ending point, then add the dollar amount of the dividend paid that quarter as cash to the value.

“Index”

Starting Price

Ending Price (12/14/17)

Dividends Paid

Quarterly Return

SPY 09/15/17

$250.09

$265.66

$1.235

+6.72%

Mr. Wizard

$22,704.92

$24,366.32

Included in ending price

+7.32%

Mrs. Wizard

$24,047.54

$25,150.48

Included in ending price

+4.59%

Mr. and Mrs Wizard vs the S&P 500 – Quarterly Return 09/15/17 – 12/14/17

In order to compare ourselves to the SPY for total return, I’ve decided to use a total “internal rate of return”. In other words I calculate how many shares of SPY we would hypothetically own if we had bought one share of SPY (closing price) on the “investment dates” (days we funded our accounts), and then dividends were reinvested.

So since we started tracking all this, we would have hypothetically ended up with 4.13486518 shares of SPY by buying one share on 2/28/15, another on 8/17/15 another on 8/16/16 and finally a fourth on 8/16/17 (all at those days’ closing prices which were $210.66, $210.59, $217.96, and 246.94 respectively, for a total “investment” of $886.15).

Meanwhile we would have accumulated the additional 0.13486518 shares by reinvesting dividends along the way (this assumes we buy shares at the opening market price the day of the dividend distribution).

Those 4.13486518 shares were worth $266.51/share at Friday’s close (a total of $1,101.98). That represents a total gain of $215.83 or 24.36%

Look over to the right of the competition tracker published here at the mother ship for more details. I can’t promise that it’s easy to figure out, but I can promise that the math’s all there.

“Index”

Total Invested

Ending Value (including dividends)

Total Return

SPY Total IRR

$886.15

$1,101.98

+24.36%

Mr. Wizard

$20,350

$24,366.32

+19.74%

Mrs. Wizard

$22,000

$25,150.48

+14.32%

Mr. and Mrs. Wizard vs the S&P500 – Total Return as of 12/15/17

It bears mentioning that while the SPY IRR scenario assumes 100% equity exposure for the entire time, we have both carried significant cash balances throughout the experiment.

There’s a couple ways to look at that. One might be that we’re only slightly behind in spite of this handicap, so actually our performance is better than it looks. (No, I don’t know what our sharpe ratios are. Don’t @ me.)

The other perspective is that the opportunity cost of trying to time your entry point into stock positions is a drag on your returns, and maybe you should just stop trying to time the market.

Thou can’t time the market, so thou shalt not try to.

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