Measuring Returns

[Moose_]

Hi All,

Each month for the next few years I plan on purchasing a parcel of shares. My question is how do I measure my annual performance against the index when I'm constantly growing the portfolio with new acquisitions?

Thanks
Moose

 

[Smurf1976]

Hi All,

Each month for the next few years I plan on purchasing a parcel of shares. My question is how do I measure my annual performance against the index when I'm constantly growing the portfolio with new acquisitions?

Thanks
Moose

I’m not suggesting it’s the only way but the method I use is to simply base it on the total funds allocated to share investment regardless of whether it’s actually invested in shares or is siting as cash.

Eg $100 available for investing with $70 in shares and $30 in cash. If I wanted to calculate a % return over whatever period of time then I’d base it on the $100.

Reason = it’s simple, easy and takes account of the fact that cash is still an asset.

 

[Moose_]

I’m not suggesting it’s the only way but the method I use is to simply base it on the total funds allocated to share investment regardless of whether it’s actually invested in shares or is siting as cash.

Eg $100 available for investing with $70 in shares and $30 in cash. If I wanted to calculate a % return over whatever period of time then I’d base it on the $100.

Reason = it’s simple, easy and takes account of the fact that cash is still an asset.

Thanks Smurf. Problem is there will be no actual cash component for this portfolio, the cash is savings accumulated each month which is deployed to shares once a month...

 

[Zaxon]

Each month for the next few years I plan on purchasing a parcel of shares. My question is how do I measure my annual performance against the index when I'm constantly growing the portfolio with new acquisitions?

You need to create yourself an "index". Initially, that's just the value of your shares. When you add new cash, adjust the index calculation so it keeps the same value.

 

[willy1111]

Hi All,

Each month for the next few years I plan on purchasing a parcel of shares. My question is how do I measure my annual performance against the index when I'm constantly growing the portfolio with new acquisitions?

Thanks
Moose

I use a VAMI spreadsheet which I created in Excel...Value Added Monthly Index.

Do some research, happy to assist further if it is what you are after.

 

[galumay]

TWIRR in excel is how i do it, if you google it you will find examples.