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.

As of the end of last quarter, I had narrowed the gap from the original $1,650 handicap mentioned above to $339.53. However, Mrs. Wizard’s portfolio bounced off the December lows a lot more vigorously than mine did. That means she won the quarterly return category and the total account value is back up to $1,128.75 higher. Maybe I’ll be able to pass her someday, but I’ve got a lot of work to do still. Of course, that also means she wins the first quarter of 2019.

Speaking of bouncing off the December lows, Mr SPYder has really ripped the last three months. It didn’t rip quite as much as Mrs. Wizard’s portfolio (which is particularly impressive since she’s been sitting on ~$6,000 in cash since August!), but it beats me by over 200 basis points.

The market rebound has put us both behind again in terms of total returns. 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. There are a couple different ways I could address the weirdness. Eventually I decided to just pick one. That way it should just come out in the wash.

So this is how I run the quarterly comparison: I take the closing price of SPY 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 (3/14/18)

Dividends Paid

Quarterly Return

SPY 12/20/18

$247.17

$281.16

$1.435

14.33%

Mr. Wizard

$27,855.19

$31,324.97

Included in ending price

12.46%

Mrs. Wizard

$28,194.72

$32,453.72

Included in ending price

15.11%

Mr. and Mrs Wizard vs the S&P 500 – Quarterly Return 12/20/18 – 03/14/18

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 5.24353539 shares of SPY by buying one share on each of the following five dates (when we made ROTH contributions):

Date of ROTH Contribution

SPY Closing Share Price

February 28th, 2015

$210.66

August 17th, 2015

$210.59

August 16th, 2016

$217.96

August 16th, 2017

$246.94

August 16th, 2018

$284.06

TOTAL “INVESTED”:

$1,170.21

The additional 0.24353539 shares come by reinvesting dividends along the way (this assumes we buy shares at the opening market price the day of the dividend distribution).

Those 5.24353539 shares were worth $281.31/share on Friday’s close (a total of $1,475.06). That represents a total gain of $304.85 or 26.05%

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

$1,170.21

$1,475.06

+26.05%

Mr. Wizard

$25,850

$31,324.97

+21.18%

Mrs. Wizard

$27,500

$32,453.72

+18.01%

Mr. and Mrs. Wizard vs the S&P500 – Total Return as of 03/15/18

It has been very interesting for me to track our progress versus the market these last two quarters. As everyone knows, December was pretty rough. Our portfolios weathered the storm very well compared to the market. The trade off, though, seems to be that we’re falling back behind now that everything’s ripping upwards again.

I’m okay with that.

Here’s another interesting table:

“Index”

Total Invested

Projected Annual Income

“Invested Yield”

SPY

$1,170.21

$23.95

2.05%

Mr. Wizard

$25,850

$1,323.66

5.12%

Mrs. Wizard

$27,500

$718.82

2.61%

So while we may just barely be keeping up with SPY in total returns, a greater proportion of those returns are coming in the form of reliable dividends as opposed to imaginary cost basis bucks (share price appreciation).

The truth of the matter is, that I don’t care that much about “beating the market” in terms of total returns. The goal is to build a stable, growing passive income stream, and in that respect, we’re still comfortably ahead of Mr. SPYder.

Remember: you can’t spend shares at the grocery store.

For now, we’re reinvesting that income stream because we’re still in the accumulation phase; however, when it comes time to start living off of that income, it’s simply a matter of flipping the switch to spending rather than reinvesting the dividends.

No market timing necessary!

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