How should I compare XIRR against inflation rate?

I used to track XIRR for my own portfolio manually until I was introduced to StockCafe in October 2018. Stock cafe’s daily email alerts & portfolio reports have been awesome!

Just wondering if you guys have any target to compare for XIRR? My current portfolio’s total XIRR is about 2.95% due to some realised losses trading stocks this year, am not too sure if this is sufficient to beat inflation.

  1. Should i assume a yearly inflation rate of 3%?
  2. If I’m vested over 4 years starting from 2015 till date, does this means that my portfolio should ideally reflect XIRR of 3% x 4 = 12%?

Would love to have you guys share your thoughts on it! Thank you.

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You can use many comparisons for portfolio performance.

The “risk free” comparisons against cash-like assets.

  1. 10 year government bond rate.
  2. Deposit interest rate on cash.
  3. Term deposit rate.
  4. SRS rate.

Performance against the market.

  1. Indices, such as STI or DJI or whichever is more closely related to the mix in your portfolio.

Performance against inflation.

  1. Personal inflation rate.
  2. Goverment announced rates.
  3. Government target rates.

If you are using inflation as the main comparison, then MAS forecast core inflation of 1.5–2.5% in 2019, so using 3% will give you a safety margin, provided your returns are more than the target.

Regarding question 2. Investing in the stockmarket market has its ups and downs. XIRR is calculated on an annualised basis over the period of the cashflows. You cannot add the three years individual XIRR to end up with a total performance. XIRR should be calculated for the whole period, which you can see in the table here.

SC calculates the historic yearly XIRR and the total XIRR, simply adding up the annual figures does not result in the total figure.

Then there are the “dividend hunters” like me, who are more interested in how the dividends perform on a YoY basis, and try not to be too concerned about the absolute portfolio performance. A YoY increase of total dividends paid above inflation and we are happy!

(Although we’d be even happier if there was a capital gain too).


hijack abit…
“YoY increase of total dividends paid above inflation” = as long as dividends paid YoY has increased by the same/higher rate as compared to inflation rate?

All hijacks are welcome…

Yep, sorry, the sentence could have been constructed more clearly.

For example with REITS looking for an annual increase in DPU.

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