A Returns Spreadsheet for Bogleheads

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longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

rst113 wrote: Sun Aug 04, 2019 9:54 am How would I add more than 9 accounts? A couple are no longer active/rolled over but I presume deleting those will mess up the tracked returns. I can add a tab but I know I would have to do something to the display and/or calculations tabs. Thanks so much for this I diligently track all my accounts monthly using this and love the overall picture it gives.
Rst113, the current version (1.9) supports up to 20 accounts. Note that the sheet for an old closed account can be shared with a new account that was opened after the old account closing. On the "Portfolio" sheet, I would name the account "New XXX & Old YYY".

longinvest
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rst113
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Re: A Returns Spreadsheet for Bogleheads

Post by rst113 »

Thanks!
herpfinance
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Re: A Returns Spreadsheet for Bogleheads

Post by herpfinance »

@longinvest,

I've been meaning to get started using a proper returns tracking spreadsheet for a while, and yours fit the bill quite nicely.

Thanks for all of the work that you put into it!
"The intelligent investor is a realist who sells to optimists and buys from pessimists" - Benjamin Graham
TheEleven
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Re: A Returns Spreadsheet for Bogleheads

Post by TheEleven »

Just came across this spreadsheet - thanks longinvest! I know very little about spreadsheets, but I was able to zero out all the numbers in the original and put my latest balances in three different accounts on the last date available. So I can track from here on out - don't want to go in and backfill. I'm wondering if there is a way to delete all the rows going back to June 2013? Just right-clicking and selecting "delete row" definitely not the way to do it - had to do a quick Undo. Sorry if this is addressed somewhere in this thread already - too many posts to review.
Topic Author
longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

TheEleven wrote: Mon Nov 25, 2019 12:15 am Just came across this spreadsheet - thanks longinvest! I know very little about spreadsheets, but I was able to zero out all the numbers in the original and put my latest balances in three different accounts on the last date available. So I can track from here on out - don't want to go in and backfill. I'm wondering if there is a way to delete all the rows going back to June 2013? Just right-clicking and selecting "delete row" definitely not the way to do it - had to do a quick Undo. Sorry if this is addressed somewhere in this thread already - too many posts to review.
TheEleven, I suggest to:
  1. Download a new fresh copy of the spreadsheet.
  2. Click on the "Portfolio" tab to select a starting year and month and give a name to each account that will be tracked.
  3. Delete example data in the Contribution, Withdrawal, and Balance columns of the "Account 1" sheet.
  4. Enter historical Contribution, Withdrawal, and Balance data into the "Account 1", "Account 2", ... sheets.
  5. Each month, fill the new row that automatically appears in the "Account 1", "Account 2", ... sheets.
Note that if an account was opened later than the selected start year and month, it's sufficient to set its initial Balance to zero to stop the spreadsheet from complaining about missing data for months preceding the opening of the account. The same trick works when an account is closed; as soon as its Balance drops to zero, the spreadsheet stops requiring new data every month.

Enjoy!
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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nydad
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Re: A Returns Spreadsheet for Bogleheads

Post by nydad »

Hi -

Thanks for putting this spreadsheet together. It is really wonderful.

I'm still trying to figure out how it all works, and I also wanted to see if I could submit a feature request -

Have you thought about adding performance calculations for 15/20/30/40 years? I lament the fact that Vanguard hasn't seen fit to provide this sort of performance data for holdings they manage, especially given that the Bogleheads/Vanguard philosophy is supposed to provide long-term returns (provided the market is growing during those periods) on the timescale of decades.

As of now, a look back 10 years (which is what Vanguard and this spreadsheet provides) misses out on the biggest market dip in recent history. I'd love to be able to see how did my portfolio do over the last 20 years!

So, I'm wondering if this is something you might consider adding to the next version of the spreadsheet? Thanks again, I've found it quite useful already!

cheers!
Topic Author
longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

nydad wrote: Wed Dec 25, 2019 5:38 pm Have you thought about adding performance calculations for 15/20/30/40 years? I lament the fact that Vanguard hasn't seen fit to provide this sort of performance data for holdings they manage, especially given that the Bogleheads/Vanguard philosophy is supposed to provide long-term returns (provided the market is growing during those periods) on the timescale of decades.
Nydad, thanks for the suggestion. I'll add the four 15, 20, 30, and 50 years periods to the current eight periods of trailing returns.
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Laurizas
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Re: A Returns Spreadsheet for Bogleheads

Post by Laurizas »

longinvest wrote: Thu Dec 26, 2019 8:20 am Nydad, thanks for the suggestion. I'll add the four 15, 20, 30, and 50 years periods to the current eight periods of trailing returns.
50 years is way too much. I think 15,20,25,30 will suffice
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Eagle33
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Re: A Returns Spreadsheet for Bogleheads

Post by Eagle33 »

Laurizas wrote: Sun Dec 29, 2019 3:22 pm
longinvest wrote: Thu Dec 26, 2019 8:20 am Nydad, thanks for the suggestion. I'll add the four 15, 20, 30, and 50 years periods to the current eight periods of trailing returns.
50 years is way too much. I think 15,20,25,30 will suffice
FIRE folks may disagree.

And why no 40?
Topic Author
longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

I have uploaded version 2.0 of the returns spreadsheet.

As usual, you'll find the links to online and downloadable versions on the wiki:Calculating personal returns page.

If you wish to use the online version, please carefully follow the instructions to make a personal copy of the shared spreadsheet. You can then use your personal copy to calculate your returns.

Changes:
  • Add longer return intervals to better match the investment horizon of Bogleheads.
As usual, comments are welcome.

Enjoy!
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
michaelsieg
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Re: A Returns Spreadsheet for Bogleheads

Post by michaelsieg »

Dear longinvest,
Thanks again for your spreadsheet, I update it monthly and it has really helped looking at the returns across all our accounts and thanks for refining it over time!
I am trying to include our direct real estate returns with your spreadsheet and I am not sure how to do it.
3 years ago, we started to participate in a few rental units, which are now about 20% of our portfolio. Since then, I have not used the cashflows for these rentals in my return calculations, and just assumed a constant value of the real estate (being conservative) – but in the long-term, I have to start tracking the real estate returns as well, just assuming the value is stable is probably not a good solution (It adds a 20% “deadweight” to my portfolio and artificially lowers the return).
So I am trying to use your spreadsheet to calculate our real estate return, but I am not sure how I should best do it.
I can download all the cashflows from the Rentec Direct webpage as an excel spreadsheet from our property manager, and it gives me the following montly cashflows:
rental income/utility payment income and all the expenses. The only other variables are the mortgage payments and the mortgage principal. I wish we could keep our accounts totally separate, but we have not been doing that, which means, if there is a positive cashflow in a month, I usually withdraw the money from the property account and either invest it (which I track with my investment return sheet) or use it to pay monthly bills/loan down payments. So my question is how do I best use your spreadsheet to calculate a monthly return?
I was thinking of taking the months with a negative cashflow (for instance last January, where we were -$1700 due to a renovation) and place this negative cashflow in the contribution column (since I had to inject the money) and if I have a month with a positive cashflow (for instance this December, $1450), I would add this to the withdrawal column, as I don’t leave this money in the property account.
I am also not sure how to enter the monthly mortgage payments, I probably should add them every month entirely in the monthly contribution column and correct for the principal increase in the balance column.
I was just curious if someone else has used this spreadsheet to track real estate returns – I don’t want to make it complicated but I think I should start to formally track our real estate returns.
Sorry that the post got too long and thanks again for creating this spreadsheet!
Michael
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longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

michaelsieg wrote: Sat Jan 11, 2020 10:33 am I am trying to include our direct real estate returns with your spreadsheet and I am not sure how to do it.
...
I was just curious if someone else has used this spreadsheet to track real estate returns – I don’t want to make it complicated but I think I should start to formally track our real estate returns.
Michael, I don't have real estate investments other than whatever is included in my global balanced index One-Fund Portfolio.

If I did have a rental investment, I would try to keep things simple by separating the real estate investment and its expenses (except those related to the mortgage) in one sheet, and put the mortgage and its payments on another sheet.

In the real estate investment sheet, every month I would count all income (e.g. rent) as withdrawals and all expenses (maintenance costs, repair costs, advertising, administrative costs, taxes, utilities, etc.) as contributions. I would include the initial entire price of the rental, including any transaction-related expenses, as a contribution and the final after-expense proceeds of the sale as a withdrawal. Every month, I would try to estimate a current market value of the rental minus the costs of selling, and I would use this amount as portfolio balance.

In the mortgage sheet, I would count the initial mortgage amount as a withdrawal. Every month, I would count the mortgage payment as a contribution and use the remaining principal amount of the mortgage as a negative portfolio balance. I would count any additional borrowed money added to the mortgage as a withdrawal, and any additional mortgage payment as a contribution.

As I said, I don't have real estate investments. This is only how I think I would do it if I did.
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michaelsieg
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Re: A Returns Spreadsheet for Bogleheads

Post by michaelsieg »

Thank you longinvest - I really appreciate it ! I will enter it this way - curious to see what the return will be.
JiggyWillis
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Re: A Returns Spreadsheet for Bogleheads

Post by JiggyWillis »

Thank you for this fantastic tool and the many years of hard work! I have been keeping monthly hand-written summaries of portfolio activity, balances and returns; takes me about 1/2 hour and I find it enjoyable. Your spreadsheet is a natural fit to receive the monthly data generated by this review.

I calculated our 2019 portfolio return at 17.73%. The spreadsheet calculated 17.7% so Spot ON!

It will no doubt prove to be valuable evidence the next time SWMBO says "we need to talk to a money guy." I can print the return page and be like PA-POW, look, same numbers as market returns for our asset allocation! You can just pay me the AUM fees, honey.
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lock.that.stock
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Re: A Returns Spreadsheet for Bogleheads

Post by lock.that.stock »

longinvest - thank you for the fantastic spreadsheet. I can sure appreciate all the hard work you've put into it to build it in a way that's intuitive and works for most folks.

A suggestion - is there a way you can build the returns calculations for each account/tab separately (perhaps on the far right margin of each account/tab). It would be nice to look at the returns of the individual accounts (in addition to what you already have for total returns calculations for the entire account bundle) for folks that are employing different investment strategies in each account. Essentially - calculations of returns for each tab with a concise summary of performance for each account presented in the same way as what's on your returns tab (with the growth chart if possible).

Again, what you have put together is fantastic work. Thank you for all your contributions.
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longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

lock.that.stock wrote: Fri Jan 24, 2020 1:40 pm A suggestion - is there a way you can build the returns calculations for each account/tab separately (perhaps on the far right margin of each account/tab).
Thanks for the comments. Looking at the returns of individual accounts could lead to behavioral pitfalls. As this is a Bogleheads spreadsheet, it only provides returns for the overall portfolio across all accounts. The returns for separate portfolios can be calculated using separate spreadsheets.
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lock.that.stock
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Re: A Returns Spreadsheet for Bogleheads

Post by lock.that.stock »

longinvest wrote: Fri Jan 24, 2020 5:17 pm
lock.that.stock wrote: Fri Jan 24, 2020 1:40 pm A suggestion - is there a way you can build the returns calculations for each account/tab separately (perhaps on the far right margin of each account/tab).
Thanks for the comments. Looking at the returns of individual accounts could lead to behavioral pitfalls. As this is a Bogleheads spreadsheet, it only provides returns for the overall portfolio across all accounts. The returns for separate portfolios can be calculated using separate spreadsheets.
Thanks for the comment. However one can argue that not looking at the returns of individual portfolios/accounts can lead to underperforming accounts being concealed by performers, as there is no ability to identify or isolate poor performers. For instance, I didn’t realize that my employers pension plan was dragging down my overall returns for a long time because i was calculating all account returns as a lump sum. After I isolated this account to be the culprit I made some readjustments to improve.

Perhaps I’m seeking more detail than others using this sheet so I’ll build the calcs into each account tab.
curiousinvestor
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Re: A Returns Spreadsheet for Bogleheads

Post by curiousinvestor »

Hi - Great spreadsheet!

I have been using Vanguard for about 17 years now Roth IRA. I have kept track of all my contributions on a spreadsheet. I have not taken withdrawals. How do I get the closing account balance for the last day of each month going back many years? Vanguard website info doesn't go back to 2003, I think.

In other words, I can do 1, 2, 4 in the Excel Account instructions tab below, but not 3. Vanguard account valuation report balance info is limited to the past 7 years, I think.

1. Add the contribution amount for each month (exclude internal cash flows such as dividend payments).
2. Add the withdrawal amount for each month (exclude internal cash flows such as account fees).
3. Add the closing account balance for the last day of each month.
4. Do not forget to include employer contributions, if any.

Any ideas how to get Vanguard's ending account balance data going back to 2003?
rossington
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Re: A Returns Spreadsheet for Bogleheads

Post by rossington »

curiousinvestor wrote: Sat Jan 25, 2020 11:58 am Hi - Great spreadsheet!

I have been using Vanguard for about 17 years now Roth IRA. I have kept track of all my contributions on a spreadsheet. I have not taken withdrawals. How do I get the closing account balance for the last day of each month going back many years? Vanguard website info doesn't go back to 2003, I think.

In other words, I can do 1, 2, 4 in the Excel Account instructions tab below, but not 3. Vanguard account valuation report balance info is limited to the past 7 years, I think.

1. Add the contribution amount for each month (exclude internal cash flows such as dividend payments).
2. Add the withdrawal amount for each month (exclude internal cash flows such as account fees).
3. Add the closing account balance for the last day of each month.
4. Do not forget to include employer contributions, if any.

Any ideas how to get Vanguard's ending account balance data going back to 2003?
I think if you go to Balances and Holdings>Balances by Date and select your date(s) that might work. But prior to 2011 it's only for Vanguard mutual funds and ETF's though.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
curiousinvestor
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Re: A Returns Spreadsheet for Bogleheads

Post by curiousinvestor »

rossington wrote: Sat Jan 25, 2020 1:27 pm
curiousinvestor wrote: Sat Jan 25, 2020 11:58 am Hi - Great spreadsheet!

I have been using Vanguard for about 17 years now Roth IRA. I have kept track of all my contributions on a spreadsheet. I have not taken withdrawals. How do I get the closing account balance for the last day of each month going back many years? Vanguard website info doesn't go back to 2003, I think.

In other words, I can do 1, 2, 4 in the Excel Account instructions tab below, but not 3. Vanguard account valuation report balance info is limited to the past 7 years, I think.

1. Add the contribution amount for each month (exclude internal cash flows such as dividend payments).
2. Add the withdrawal amount for each month (exclude internal cash flows such as account fees).
3. Add the closing account balance for the last day of each month.
4. Do not forget to include employer contributions, if any.

Any ideas how to get Vanguard's ending account balance data going back to 2003?
I think if you go to Balances and Holdings>Balances by Date and select your date(s) that might work. But prior to 2011 it's only for Vanguard mutual funds and ETF's though.
Hi - Yes but I think a problem is that I think I remember I had a Vanguard IRA and Vanguard Brokerage IRA, so some of the history is lost, but now it's combined to only a Vanguard Brokerage IRA. So it doesn't have everything anymore.

In any case, I went ahead with only the past 7 years of data, so it goes back to 2013 instead of 2003 when I first opened it, which is still very useful.
rossington
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Re: A Returns Spreadsheet for Bogleheads

Post by rossington »

curiousinvestor wrote: Sat Jan 25, 2020 1:35 pm
rossington wrote: Sat Jan 25, 2020 1:27 pm
curiousinvestor wrote: Sat Jan 25, 2020 11:58 am Hi - Great spreadsheet!

I have been using Vanguard for about 17 years now Roth IRA. I have kept track of all my contributions on a spreadsheet. I have not taken withdrawals. How do I get the closing account balance for the last day of each month going back many years? Vanguard website info doesn't go back to 2003, I think.

In other words, I can do 1, 2, 4 in the Excel Account instructions tab below, but not 3. Vanguard account valuation report balance info is limited to the past 7 years, I think.

1. Add the contribution amount for each month (exclude internal cash flows such as dividend payments).
2. Add the withdrawal amount for each month (exclude internal cash flows such as account fees).
3. Add the closing account balance for the last day of each month.
4. Do not forget to include employer contributions, if any.

Any ideas how to get Vanguard's ending account balance data going back to 2003?
I think if you go to Balances and Holdings>Balances by Date and select your date(s) that might work. But prior to 2011 it's only for Vanguard mutual funds and ETF's though.
Hi - Yes but I think a problem is that I think I remember I had a Vanguard IRA and Vanguard Brokerage IRA, so some of the history is lost, but now it's combined to only a Vanguard Brokerage IRA. So it doesn't have everything anymore.

In any case, I went ahead with only the past 7 years of data, so it goes back to 2013 instead of 2003 when I first opened it, which is still very useful.
You could try calling and request a report they could mail to you. Worth a shot. I think they keep the data.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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Eagle33
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Re: A Returns Spreadsheet for Bogleheads

Post by Eagle33 »

If you have your quarterly statements back to 2003, then you can enter those values leaving 2 months between each quarterly entry. Then you can spread 1/3 the gain or loss between quarters equally in the missing months. Close enough for historical values older than 1 year.
taxable_ted
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Re: A Returns Spreadsheet for Bogleheads

Post by taxable_ted »

Hi longinvest, thanks so much for putting together the spreadsheet. Very helpful!

I have a question regarding best practices for dealing with capital gain taxes. If I sell investment at a profit, and then transfer money out of that account to pay taxes, should I consider that a withdrawal? In this case, wouldn't the returns show a mixed picture of before and after tax returns (vs. a clean pre-tax view if no sale transactions and tax payments are ever recorded, for example). What's the best way to deal with this issue?

Thanks!
Topic Author
longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

Congratulations for your first forum post!
taxable_ted wrote: Wed Feb 12, 2020 10:49 pm Hi longinvest, thanks so much for putting together the spreadsheet. Very helpful!
I'm glad it helps.
taxable_ted wrote: Wed Feb 12, 2020 10:49 pm I have a question regarding best practices for dealing with capital gain taxes. If I sell investment at a profit, and then transfer money out of that account to pay taxes, should I consider that a withdrawal?
Any money transferred out of the account must be counted as a withdrawal.
taxable_ted wrote: Wed Feb 12, 2020 10:49 pmIn this case, wouldn't the returns show a mixed picture of before and after tax returns [...]?
It will just show normal returns (before taxes). It's easy to see this when you consider that the spreadsheet has no way of knowing what will be done with withdrawn money; whether it's used for taxes or it's used for food, travel, gifts, and other expenses won't affect its calculations.
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taxable_ted
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Re: A Returns Spreadsheet for Bogleheads

Post by taxable_ted »

longinvest wrote: Thu Feb 13, 2020 6:41 pm It will just show normal returns (before taxes). It's easy to see this when you consider that the spreadsheet has no way of knowing what will be done with withdrawn money; whether it's used for taxes or it's used for food, travel, gifts, and other expenses won't affect its calculations.
I see. Any balance remaining in the account after the withdrawal to pay for taxes will then start accruing (or falling!) in value again on a pre-tax basis and so the returns shown in the account would always be before taxes. I confused myself there for a while, but thanks for clarifying!
Shojin
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Investor return showing Err:523

Post by Shojin »

I've been using this excellent spreadsheet for a couple of years - I've not found anything better; thank you.

This week I'm getting an error code for the Investor return - Err:523 in LibreOffice Calc. The calculation does not converge, apparently.

I've been checking and testing to see what's causing this, including pasting all my account returns into a clean spreadsheet and it triggers the same error every time. It seems, hilariously, to be caused by the thumping loss showing this past month. If I modify one of the accounts returns upwards I have found an exact number that turns the IR number back into a percentage. It seems I've lost enough this month to break the spreadsheet :shock:

I just tried pasting the numbers in the Google Sheets version and that worked fine, so it seems to be a LO Calc thing. I can trigger it on the clean Calc spreadsheet just by deleting the $95,000 final withdrawal.

I've also tried toggling Iterative References on and off in Tools > Options > LibreOffice Calc > Calculate.

:confused
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longinvest
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Re: Investor return showing Err:523

Post by longinvest »

Shojin wrote: Thu Apr 02, 2020 8:24 am This week I'm getting an error code for the Investor return - Err:523 in LibreOffice Calc. The calculation does not converge, apparently.
Shojin, thanks for the report.

1) Do you have a specific cell where this error is happening?
2) Have you tried installing a newer version of LibreOffice, if you don't have the latest version?
Shojin wrote: Thu Apr 02, 2020 8:24 am If I modify one of the accounts returns upwards I have found an exact number that turns the IR number back into a percentage. It seems I've lost enough this month to break the spreadsheet :shock:
It might be a problem related to the money-weighted return calculation in cell Calculations.Y6. It uses the IRR function which needs an initial estimate. Maybe it's unable to find a negative internal rate of return (IRR) due to the positive 0.01 estimate I provided?

What happens if you change the second argument of the IRR() function from 0.01 to 0?

In other words, change Calculations.Y6 from:

Code: Select all

=IF(X5=0,"",POWER(1+IRR(W5:W988,0.01);MIN(12,X5))-1)

to

Code: Select all

=IF(X5=0,"",POWER(1+IRR(W5:W988,0);MIN(12,X5))-1)

Shojin wrote: Thu Apr 02, 2020 8:24 am I just tried pasting the numbers in the Google Sheets version and that worked fine, so it seems to be a LO Calc thing. I can trigger it on the clean Calc spreadsheet just by deleting the $95,000 final withdrawal.
As it works in Google Sheets, the problem is probably specific to LibreOffice Calc. But, it's I'd prefer to precisely identify the nature of problem for peace of mind. I don't like the spreadsheet to fail at calculating returns.
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Shojin
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Re: A Returns Spreadsheet for Bogleheads

Post by Shojin »

Thanks for looking into this. Here's what I've found based on your advice:

1. It is happening in Calculations.Y6, as you said.
2. My LibreOffice is up-to-date. Latest stable version 6.3 64-bit.

This is a bit odd:

1. Changing the IRR() function from 0.01 to 0 in my spreadsheet with my balances put in solves the problem.
2. However, if I recreate the same issue in the clean example Calc spreadsheet it does not. Nor does it if I artificially deflate my balances further, so there's still a point where it breaks. I found the exact point in the example spreadsheet:
- change IRR() to 0 in Calculations.Y6
- change the number in Account1.C41 to $10,800.00: Err.523
- change the number in Account1.C41 to $10,801.00: -68.9% reported in Calculations.Y6

With my numbers the tipping point seems to be around -7.2% with IRR() at 0.01 and -16.9% with IRR() at 0.
Topic Author
longinvest
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

Shojin wrote: Thu Apr 02, 2020 6:11 pm 1. It is happening in Calculations.Y6, as you said.
Thanks Shojin.
Shojin wrote: Thu Apr 02, 2020 6:11 pm This is a bit odd:

1. Changing the IRR() function from 0.01 to 0 in my spreadsheet with my balances put in solves the problem.
2. However, if I recreate the same issue in the clean example Calc spreadsheet it does not.
This could mean that the LibreOffice Calc implementation of the IRR() function isn't very good. If that's the case, I don't see an obvious solution to circumvent this. :?

You could always try to force LibreOffice Calc to "recalculate all formulas in all sheets" using Ctrl+Shift+F9 (also available under the Data→Calculate menu). Sometimes this solves weird problems.
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Shojin
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Re: A Returns Spreadsheet for Bogleheads

Post by Shojin »

longinvest wrote: Thu Apr 02, 2020 6:53 pm This could mean that the LibreOffice Calc implementation of the IRR() function isn't very good. If that's the case, I don't see an obvious solution to circumvent this. :?

You could always try to force LibreOffice Calc to "recalculate all formulas in all sheets" using Ctrl+Shift+F9 (also available under the Data→Calculate menu). Sometimes this solves weird problems.
This didn't work. Interesting that's it's a flawed function. Anyway, the 0.01 > 0 solution is a reasonable workaround for this month at least. Thanks for your help.
Shojin
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Re: A Returns Spreadsheet for Bogleheads

Post by Shojin »

I have a new question: if I enter the balance as $0 in E16, indicating that the account was empty before I made the first contribution, the first month's return is calculated at twice the actual return. For example:

Portfolio start date: November 2013
Balance entered in E16 (October 2013): $0

Row 17
Contribution: $600
Withdrawal: $0
Balance: $660

Spreadsheet calculates this a 20% return, rather than 10%.
I checked in LibreOffice and Google, just in case it was another Calc anomaly; both did the same thing.

It seems to work correctly after this first month, but if you have returns during the first month you don't want to skip it to fill in a positive value in E16 as it means the growth rate is altered.

Please point out my stupidity - I'm missing something here.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

Shojin wrote: Sun Apr 05, 2020 7:18 pm I have a new question: if I enter the balance as $0 in E16, indicating that the account was empty before I made the first contribution, the first month's return is calculated at twice the actual return. For example:

Portfolio start date: November 2013
Balance entered in E16 (October 2013): $0

Row 17
Contribution: $600
Withdrawal: $0
Balance: $660
This doesn't work, as it causes errors due to missing data in December 2013. But, I can sidestep this problem with:

Portfolio start date: March 2020
Balance entered in E16 (February 29, 2020): $0

Row 17 (March 2020)
Contribution: $600
Withdrawal: $0
Balance: $660
Shojin wrote: Sun Apr 05, 2020 7:18 pm Spreadsheet calculates this a 20% return, rather than 10%.
The spreadsheet is correct; the return is effectively 20%. The explanation is in the first post of this thread:
longinvest wrote: Sat Nov 01, 2014 9:50 pm (*) As suggested by W. Bernstein in The Four Pillars of investing, half the contributions and withdrawals are applied at the start of the month, and the other half at the end of the month.
The spreadsheet assumes that $300 is contributed at the beginning of the month and $300 at the end of the month. Let's check that the return is effectively 20% in one month:
  • ($300 X (1 + 20%)) + $300 = $660
The spreadsheet doesn't know how and when the $600 was contributed. It could have been contributed $20 at a time over 30 distinct days of the month. It could have been entirely contributed at the start or at the end of the month. William Bernstein's suggestion of splitting contributions in halves contributed at the start and at the end of the period seemed to me like a sensible approximation (with interesting mathematical properties to avoid problems with some tricky cases).
Last edited by longinvest on Sun Apr 05, 2020 11:46 pm, edited 1 time in total.
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Re: A Returns Spreadsheet for Bogleheads

Post by Shojin »

Thanks for clarifying: I'm glad the calculations are working as intended, even if I can't quite get my head around them.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

Shojin wrote: Sun Apr 05, 2020 10:08 pm I'm glad the calculations are working as intended, even if I can't quite get my head around them.
Here's the intuition. The $600 has grown 10% to $660. But, if we assumed that the $600 was contributed on March 15, the monthly growth rate has to be double that, near 20%.

Here's another example. Imagine that there's already $100 in the account at the beginning of the month and that another $100 is contributed into the account in the middle of the month. Let's, again, assume that the newly contributed $100 grows to $110 during the second half of the month. The initial $100 grows between the 1st and the 15th. if we assume a constant monthly growth rate, it has to grow to $110 by the 15th, and then to $121 by the end of the month. At the end of the month, the account contains ($110 + $121) = $231. The monthly growth rate is thus obviously greater than 10%, right? That's where the 20% comes from.

The spreadsheet does things a little differently (it doesn't assume that the contribution was made at mid-month). It assumes that half of the contribution was made at the beginning of the month, and the other half at then end of the month. This is obviously an approximation (as we don't know the exact date of cash flows), but it's generally good enough. I've discussed this previously in this post and this post.
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Re: A Returns Spreadsheet for Bogleheads

Post by Shojin »

That's really helps. Think 'growth rate' rather than 'growth'.

Thanks, again.
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Re: A Returns Spreadsheet for Bogleheads

Post by ukwldkat »

Hi Longinvest,
Recently started using the Investment returns xls spreadsheet. Looks very useful. Thanks for all the effort.
Few questions
1) Is the XLSX supported on the excel for Mac? Somehow I am having issue with Calculation!Y92.
2) Is there a way to have different start date for different accounts. For my 401k, i dont have the amounts from 2014 but I have this information for other accounts.

Thanks
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

ukwldkat wrote: Mon May 18, 2020 3:23 pm 1) Is the XLSX supported on the excel for Mac? Somehow I am having issue with Calculation!Y92.
Ukwldkat, there's no formula in cell Calculations!Y92. If you meant cell Calculations!Y6, please read this post and the few posts that followed.

I haven't tested the XLSX spreadsheet on a Mac, but it works in Microsoft's online Office.
ukwldkat wrote: Mon May 18, 2020 3:23 pm 2) Is there a way to have different start date for different accounts. For my 401k, i dont have the amounts from 2014 but I have this information for other accounts.
You simply need to put $0 as initial balance, in the 401k account, and only start filling data when the account starts,
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Re: A Returns Spreadsheet for Bogleheads

Post by Eagle33 »

longinvest wrote: Mon May 18, 2020 5:04 pm
ukwldkat wrote: Mon May 18, 2020 3:23 pm 1) Is the XLSX supported on the excel for Mac? Somehow I am having issue with Calculation!Y92.
Ukwldkat, there's no formula in cell Calculations!Y92. If you meant cell Calculations!Y6, please read this post and the few posts that followed.

I haven't tested the XLSX spreadsheet on a Mac, but it works in Microsoft's online Office.
ukwldkat wrote: Mon May 18, 2020 3:23 pm 2) Is there a way to have different start date for different accounts. For my 401k, i dont have the amounts from 2014 but I have this information for other accounts.
You simply need to put $0 as initial balance, in the 401k account, and only start filling data when the account starts,
We use a Mac and do not have an issue with our accounts that started at different times. The late started accounts are setup as longinvest states.
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

Hi Long,

I'm not expecting you to do anything with this information, but thought you might be interested. I wanted to see how much of my IRR is coming from dividends. Since, in my case, dividends are my only withdrawals (and are promptly re-invested), I copied your two flow columns and removed withdrawals from the formula. I then have a second IRR cell referencing those. That will work well until I retire. :)

p.s. Once I'm posting about modifications I've made to your spreadsheet: I also have a cell with =INDIRECT("E"&(T5+5)). This lets me add the balance of the most recent month to a summary section.
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Re: A Returns Spreadsheet for Bogleheads

Post by crinkles2 »

If I am looking at an ETF which has a dividend paid to a cash account, is that counted as a withdrawal?
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

crinkles2 wrote: Wed Jun 17, 2020 4:33 am If I am looking at an ETF which has a dividend paid to a cash account, is that counted as a withdrawal?
Yes, at least I do. Otherwise the return would be understated.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

crinkles2 wrote: Wed Jun 17, 2020 4:33 am If I am looking at an ETF which has a dividend paid to a cash account, is that counted as a withdrawal?
Crinkles2, this depends on whether the cash account is within or outside of the portfolio. If the cash account is within the portfolio, the dividend payment is an internal cash flow and isn't a withdrawal. If the cash account is outside of the portfolio, the dividend payment is a withdrawal.

In other words, if the cash account is outside of the portfolio, a dividend payment sends cash out of the portfolio as a withdrawal and reinvesting the money deposited into the cash account implies send it it back into the portfolio as a contribution. I find this pretty tedious to track. It could also lead to behavioral pitfalls.

I personally prefer for all "natural" cash flows to remain within the portfolio. So, I would consider the cash account to be within my portfolio. This seems cleaner and allows me to decide of my own portfolio contributions and withdrawals. I use the VPW Accumulation And Retirement Worksheet as a guide for deciding how much to contribute (currently during accumulation) and how much to withdraw (when I'll retire).
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

sean.mcgrath wrote: Wed Jun 17, 2020 4:06 am I wanted to see how much of my IRR is coming from dividends. Since, in my case, dividends are my only withdrawals (and are promptly re-invested), I copied your two flow columns and removed withdrawals from the formula. I then have a second IRR cell referencing those. That will work well until I retire. :)
Sean, unfortunately this results into incorrect and misleading information. I'll let you verify this yourself so that you understand why. Here's how: build a similarly modified spreadsheet to calculate the return coming from capital gains and losses. In other words, increase the monthly balance only by the amount of dividend that was paid, ignoring any capital gain or loss. You'll quickly discover that total return, over time, won't be equal to the sum of capital and dividend returns, implying that the annualized "dividend return" and "capital return" calculated using your method are erroneous.

There's unfortunately no clean way to isolate returns due to dividends from returns due to capital fluctuations over time. Both are inherently interlinked through total returns.

From a portfolio return perspective, a withdrawn or reinvested dividend payment is equivalent. If dividends aren't withdrawn or reinvested, they end up sitting in cash within the portfolio implying a gradual asset allocation change. A dividend payment could have a detrimental impact when one tries to calculate "after-tax returns" as it usually implies a "tax loss" in such a context.

In summary, I'd try to avoid the behavioral pitfall of looking at returns in isolation (such as "dividend return" and "capital return"). In normal Boglehead investor settings, only total returns count, except when estimating tax costs which usually favors of minimizing the amount of dividends. Warren Buffett, even though he is a market timer, fully understands this. His company, Berkshire Hathaway inc., doesn't pay any dividend to minimize ongoing tax costs for its stockholders.

At the end of the day only total returns count.
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

longinvest wrote: Wed Jun 17, 2020 7:24 am Sean, unfortunately this results into incorrect and misleading information.
Interesting, thanks for the detailed reply long. It's not intuitive to me, and I need to think it through. The total return comment is clear, of course.
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

longinvest wrote: Wed Jun 17, 2020 7:24 am Sean, unfortunately this results into incorrect and misleading information. I'll let you verify this yourself so that you understand why. Here's how: build a similarly modified spreadsheet to calculate the return coming from capital gains and losses. In other words, increase the monthly balance only by the amount of dividend that was paid, ignoring any capital gain or loss. You'll quickly discover that total return, over time, won't be equal to the sum of capital and dividend returns, implying that the annualized "dividend return" and "capital return" calculated using your method are erroneous.

There's unfortunately no clean way to isolate returns due to dividends from returns due to capital fluctuations over time. Both are inherently interlinked through total returns.
Ok, I haven't done what you suggest (although I will try it). What I have done is compare two things:

1. I take your IRR and subtract my "calculated Dividend IRR." I subtract this from your IRR to get my imputed "non-Dividend IRR."

2. I remove all the dividend payments from the spreadsheet, so I am only left with returns not from Dividends.

The non-Dividend IRRs are the same with both approaches. This says to me that I can calculate the return without dividends. Are you saying that the two IRRs aren't additive?


Edit: I can believe you are right, but at least as far as I can tell, it works.

For example, I took my ITOT for the last 3.5 years. Your IRR is 10.3%. When I zero out Dividends I get 8.2%. When I include only dividends (so balance = contributions + dividends and withdrawals are set to zero), I get 2.1%. These are exactly the numbers that I got from my modification of your spreadsheet.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

sean.mcgrath wrote: Wed Jun 17, 2020 1:59 pm
longinvest wrote: Wed Jun 17, 2020 7:24 am <There's unfortunately no clean way to isolate returns due to dividends from returns due to capital fluctuations over time. Both are inherently interlinked through total returns.
I can believe you are right, but at least as far as I can tell, it works.
Let's pick a hypothetical investment that gains 0.25% in value every month and also pays 0.50% of its monthly start value as a dividend at the end of the month.

If I buy $100 of this investment and keep it for one month, I'll get:
  • a $0.25 capital gain as the investment will have grown to $100.25 in value by the end of the first month, and
  • a $0.50 dividend at the end of the first month.
It's pretty obvious that this investment is making a 0.75%/month total return.

It would also seem pretty obvious that this investment has a 0.25%/month capital return and a 0.50%/month dividend return as total return = capital return + dividend return.

But, if I continue holding the investment and look at the annual returns, this fundamental property breaks. Let's check this.

Let's continue with the second month. The now $100.25 investment will again make a 0.25% capital return (and also a 0.50% dividend return) and I'll get:
  • a $0.250625 capital gain as the investment will have grown to $100.5000625 in value (and
  • a $0.50125 dividend at the end of the second month).
And so on. At the end of the 12th month, the capital (assuming dividends are withdrawn) will have grown by (((1.0025)^12) - 1) = 3.041596%. Let's call this the annual capital return of the investment.

Let's try again, but reinvest the dividend to calculate total returns. At the end of the first month, I had a total portfolio of $100.75 composed of $100.25 invested and $0.50 cash. If I buy $0.50 of the investment at the current price, my $100.75 portfolio will grow by 0.75%, that's $0.755625. At the end of the second month, my portfolio is worth $101.505625.

And so on. At the end of the 12th month, the portfolio will have grown by (((1.0075)^12) - 1) = 9.380690%. That's the annual total return of the investment.

So, if the total return is 9.380690% and the capital return is 3.041596%, it seems pretty obvious that the dividend return should be (9.380690% - 3.041596%) = 6.339364%. Right?

Yet, we know the monthly capital and dividend returns. Let's check if all these monthly returns are coherent with the annual returns we calculated:
  • Capital return: 0.25%/month (((1 + 0.25%)^12) - 1) = 3.041596%/year. This matches. 😀
  • Dividend return: 0.50%/month (((1 + 0.50%)^12) - 1) = 6.167781%/year. This doesn't match! 😞
  • Capital return: 0.75%/month (((1 + 0.75%)^12) - 1) = 9.380690%/year. This matches. 😀
So, we have just found that there are two possible annual dividend returns: either 6.339364% or 6.167781%. They obviously can't both be right. It follows that there doesn't exist such a thing as a coherently-defined dividend return. QED.

What's the problem? The problem is compounding. When we annualize the monthly returns, we get an isolated annual capital return (3.041596%) and an isolated annual dividend return (6.167781%) as well as an annual total return (9.380690%). The sum of the isolated returns is (3.041596% + 6.167781%) = 9.209377%. That's less than the annual total return. The difference (9.380690% - 9.209377%) = 0.171313% is caused by compounding. It's due to both capital and dividend monthly returns.

Attributing the extra 0.171313% return to dividends is incorrect and misleading. This extra return isn't due solely to dividends. Had the investment experienced a 0% capital return, there wouldn't have been such an extra return. (I leave the detailed calculations to check this as an exercise).

Hint: I remind readers about high school maths: (a + b)² = a² + b² + 2ab. Yes, right, some people seem to always forget about that annoying last term (2ab).

In summary, compounding inherently links capital gains and dividends within total returns and generates an extra return. This makes it impossible to express coherent dividend and capital returns such that (dividend return + capital return = total return) consistently across different measuring periods.
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

longinvest wrote: Wed Jun 17, 2020 9:00 pm Attributing the extra 0.171313% return to dividends is incorrect and misleading. This extra return isn't due solely to dividends. Had the investment experienced a 0% capital return, there wouldn't have been such an extra return. (I leave the detailed calculations to check this as an exercise).

Hint: I remind readers about high school maths: (a + b)² = a² + b² + 2ab. Yes, right, some people seem to always forget about that annoying last term (2ab).

In summary, compounding inherently links capital gains and dividends within total returns and generates an extra return. This makes it impossible to express coherent dividend and capital returns such that (dividend return + capital return = total return) consistently across different measuring periods.
Ok, I think I see now why we are coming to different conclusions. You are assuming that the dividends are re-invested, and then you have an element of gain on the dividend. As I stated above, I don't do that. The dividends are withdrawn, and could be invested into anything or sent into my USD checking account. I get that you are correct in the general case, but in my specific one I think it works. I am going to play around with your example to test it, though.

EDIT: no, I think I'm incorrect. I tried another one and it didn't add up. :D I think I took a strange example, because I never had additional contributions to ITOT. Thanks for the explanations, long -- I'm going to play with it a bit more.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

sean.mcgrath wrote: Thu Jun 18, 2020 2:38 am Ok, I think I see now why we are coming to different conclusions. You are assuming that the dividends are re-invested, and then you have an element of gain on the dividend. As I stated above, I don't do that. [...]
Reinvesting dividends or withdrawing them has, by definition, no impact on time-weighted returns, which is what I was discussing. There's a reason why mutual funds are required, by law, to report time-weighted returns; it's because these returns are comparable, unlike money-weighted returns.

I've provided a mathematical proof that there can't exist a coherent definition of a time-weighted "dividend return" such that (dividend return + capital return = total return) across different measuring periods. One could use a similar approach to prove that there can't exist, either, a coherent definition of a time-weighted "capital return" such that (dividend return + capital return = total return) across different measuring periods.

This is important. An investment can't have a x%/month return when its annual return isn't ((1 + x%)^12 - 1) = y%/year. Returns have to be coherently defined to mean something.

Using an incoherent definition of a "dividend return" and attributing to it part of the contribution of an incoherently-defined capital return within a coherently-defined compound total return is incorrect and misleading.
Last edited by longinvest on Thu Jun 18, 2020 6:15 am, edited 2 times in total.
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Re: A Returns Spreadsheet for Bogleheads

Post by sean.mcgrath »

longinvest wrote: Thu Jun 18, 2020 6:09 am
Thanks, live. I think you missed my edit, though. I confirmed your statement.
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Re: A Returns Spreadsheet for Bogleheads

Post by longinvest »

sean.mcgrath wrote: Thu Jun 18, 2020 6:15 am I think you missed my edit, though. I confirmed your statement.
I saw your edit, but it didn't retract your statement about how I was calculating returns. I thought that it was important to clarify that the choice of reinvesting dividends or withdrawing them has no impact on time-weighted returns which are used in most forum discussions and are reported by mutual funds.
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