Thread: Return on a series of investments

I'm trying to compute the compound annual growth rate for a series of 5 investments. Each investment is for a different amount and for a different time period.

Please help me compute the overall return on these investments.

Thanks,
John S

Let A,B,C,D,E be the 5 investment amounts, and a,b,c,d,e be their ANNUAL rates.

Annual yield = (Aa + Bb + Cc + Dd + Ee) / (A + B + C + D + E)

If that's not what you want, then please post a COMPLETE question.

Wilmer,

Thanks for your timely response --it is most appreciated.

John S

Wilmer,

To follow up on your response.

I've used your approach to compute annual yield, but I get a counter intuitive answer. My 5 investments have an overall very positive return, but when using your approach I get a negative annual rate of return.

Several of the investments are for short periods and have a large negative rate of return and outweigh the longer investments which in total provide a large postive amount of return.

What are your thoughts?

Thanks again

John S

Pretty difficult for me to "understand" without examples.

Are you using the negative rates properly?

5000 @ 8%
9000 @ -11%
(5000 * .08 + 9000 * -.11) / (5000 + 9000) = -.0421 ; -4.21%

9000 @ 8%
5000 @ -11%
(9000 * .08 + 5000 * -.11) / (9000 + 5000) = +.0121 ; +1.21%

Do your calculations reflect those?

Wilmer,

Here are the specifics

Investment Days Held P/L Return
5,024 989 3,051 22%
7,000 1316 27,547 109%
4,925 49 -1,355 -205%
7,246 422 -978 -12%
5,030 1052 1,090 8%

As you can see there is an overall profit, but using your approach gives a -6% return.

Again, thanks for your interest and help.

John S

Wilmer,

Sorry for the formatting --looks like spaces are ignored.

Anyway, the numbers are there, they just need to be seperated.

Thanks again,

John

Investment Days Held P/L Return
5,024 989 3,051 22%
7,000 1316 27,547 109%
4,925 49 -1,355 -205%
7,246 422 -978 -12%
5,030 1052 1,090 8%

Ahhh...I see; that does at "face value" compute to a -6.3% return;
BUT:
we can't use the $4925 (49 days) that way to calculate the return;
the 4925 needs to be "annualized": 4925 * 49/365 = 660;
like, investing 4925 for 49 days is same as investing 660 for 365 days.

So your schedule really is:
Investment Days Held P/L Return
5,024 989 3,051 22%
7,000 1316 27,547 109%
** 660 365 -1,355 -205%
7,246 422 -978 -12%
5,030 1052 1,090 8%
=====
24960 (total)

Put that through the grinder: you'll get a 27.7% return.

So you're richer than you thought

Wilner,

Thanks again for your help.Your recommendation makes sense

However, being the obsessive person that I am, I used your approach on the other 4 investments --it seems it should apply to all investments. I got a whopping 47% return--which exceeded my wildest expectations.

Anyway, I am also a social drinker and like your thinking on the subject--my son is visiting and I will get back with you early next week.

Thanks for your interest.

John S

Originally Posted by John S

However, being the obsessive person that I am, I used your approach on the other 4 investments --it seems it should apply to all investments. I got a whopping 47% return--which exceeded my wildest expectations.

No, it should not apply.
The 47% that you get is for over 1 year.
Only 1 year's worth of interest is used to determine ANNUAL return.
And the formula (which does not use the interest amounts) uses exactly
the equivalent of 1 year's interest by using rate and amount.

To calculate the return FOR 1 YEAR, you only need the amount and rate:
5,024 22%
7,000 109%
660 -205% : this amount of 660 is the equivalent of 4,925 over 49 days
7,246 -12%
5,030 8%
==========
24960 27.7%

Soooo...if you're having drinks this weekend, social I

Wilner,

Thanks again--believing in the Chinese proverb regarding "Teaching how to fish rather than giving away fish" I would rather get a clear and complete understanding of these calculations than have to ask a bunch of dumb questions.

Could you either direct me to or provide some reference material on the subject of calculating these kind of returns.

Thanks again for your help!

John S

We had our fair share of social drinking this week-end

calculating return on portfolio - Google Search=

Wilner,

Once again thanks--I had gone to Google and asked for Financial Calculations--which turned out to be a very, very broad subject. Your search was most helpful and this should be my last entry.

Thanks,

John S

Hope I helped.
"Happy invs't trails to you...."