Results 1 to 3 of 3

Thread: Someone check my math on CAGR and voice your opinion please? Thank you for reading!

  1. Default Someone check my math on CAGR and voice your opinion please? Thank you for reading!

    Hello,

    So I've been crunching numbers comparing Compound Annual Growth Rates for the S and C funds... about six months ago, I initially did this calculation for a time period of 13 years (from 2007-2019), which resulted in the CAGRs being almost the same (around 8%). But after analyzing the two funds since 2000 (up through now including 2020), it looks like the CAGR for the S fund is definitely beating the C fund out (at least for these years). C: approximately 6.6% and S: 8.3%. This has gotten me debating on whether or not I should put more money into the S rather than just the C. This analysis was the result of seeing such fine returns for the S fund this year, so I wanted to see how it performed over the past 20 years while compared to the C fund.

    I'm going to attach my own spreadsheet in which I've calculated these... the annual return rates come straight from the TSP website, and I've calculated CAGR with both geometric mean and also [(final/initial balance)^(1/# years concerned) -1]*100. The *100 merely for %.

    Edit: I'm a service member and not a financial consultant. I'm sure these values are different than "de-facto" growth rates based on how often the rates are calculated (e.g. annually, daily etc), and also, I started with a hypothetical $10,000 just to view what would have happened in each of these funds over the past 20 years. Definitely welcome any feedback and thoughts on smartly investing in S and C over the long haul. I'm looking to pull my money out in 28 years and I'll continue to take as much risk as possible for at least the next 18-20 years.

    PS -- Please let me know if my attachment doesn't work, and I will upload merely the text.
    Attached Files Attached Files
    Last edited by antonichen; 01-19-2021 at 02:40 AM. Reason: Typo in Excel Sheet


  2.  
  3. #2

    Join Date
    Mar 2006
    Location
    Raleigh, NC
    Posts
    3,149

    Default Re: Someone check my math on CAGR and voice your opinion please? Thank you for readin

    I use MoneyChimps 'CAGR of the Stock Market (Annualized Return)' to get those numbers - makes life much easier

    You make a valid point - and, one that I surprisingly figured out in a post I did today. My post was actually about Investment Risk and the concerns I had about a few chaps reaching for the stars within a couple of years of retirement... Regretfully, I forgot to retitle it and the title carried over from a previous post. Oh well...

    Anyway, your computations seem to be in the ballpark. The CAGR posted by MoneyChimp is 6.59% with dividends reinvested. However, if you look at the computation for CAGR, I'm not certain you got the equation correct. It is based on Standard Deviation - is that what your Geometric Mean computations are getting to? If so, then your final numbers lead you to your conclusion - but there is a but...

    The Standard deviation of the two funds differ rather dramatically for that time period:
    • C Fund: 17.77%
    • S Fund: 21.02%


    That means that a normal return for the 'C Fund' fell between -11.15% and +24.40%
    While that of the 'S Fund' fell between -12.73 and 29.31

    Hmm, that would still make the S Fund a very good option now that I am looking at it...

    Personally, I'd mix in a little F and I fund to reduce that risk (standard deviation). My standard deviation is at about 9% rather than 18% or 21%...
    Lookin' up at the 'G Fund'!!!

  4.  
  5. Default Re: Someone check my math on CAGR and voice your opinion please? Thank you for readin

    Equations came from the TSP website: https://www.tsp.gov/publications/oc05-16w.pdf

  6.  

Tags for this Thread

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
SPY (C Fund) (delayed)
Someone check my math on CAGR and voice your opinion please? Thank you for reading!
(Stockcharts.com Real-time)
DWCPF (S Fund) (delayed)
Someone check my math on CAGR and voice your opinion please? Thank you for reading!
(Stockcharts.com Real-time)
EFA (I Fund) (delayed)
Someone check my math on CAGR and voice your opinion please? Thank you for reading!
(Stockcharts.com Real-time)
BND (F Fund) (delayed)
Someone check my math on CAGR and voice your opinion please? Thank you for reading!
(Stockcharts.com Real-time)

Yahoo Finance Realtime TSP Fund Tracking Index Quotes