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I looked through the previous questions, and couldn't find one that quite addresses my question. If I start with $1000, and through investing it goes to $1200(100 shares at $10 go to $12), I can say I have a 20% return. I receive a "$0.5" per share imaginary dividend, a $2.50 total gain, I can say I am at 25%. My problem arises when I deposit money, how do I normalize/not count/account for this extra increase? I don't want it to be included in the ROI, as I added the money, it wasn't a gain. Hope the question makes sense.

$1000 Initial
$1200 (100 shares increase to $12) ROI 20%
$1250 ($0.50 dividend per share) ROI 25%


$1350 (Deposited $100) ROI ??% //Edit correct amount
How to track ROI going forward?

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  • Should the $1350 line be deposited $1100 ?
    – Victor
    Commented Mar 29, 2014 at 20:28

2 Answers 2

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You can calculate the "return on investment" using libreoffice, for example. Look at the xirr function. You would have 2 columns, one a list of dates (ie the dates of the deposits or dividends or whatever that you want to track, the last entry would be today's date and the value of the investment today. The xirr function calculates the internal rate of return for you.

If you add money to the account, and the current value includes the original investment and the added funds, it will be difficult to calculate the ROI. If you add money by purchasing additional shares (or redepositing dividends by buying additional shares), and you only want to track the ROI of the initial investment (ignoring future investments), you would have to calculate the current value of all of the added shares (that you don't want to include in the ROI) and subtract that value from the current total value of the account. But, if you include the dates and values of these additional share purchases in the spreadsheet, xirr will calculate the overall IRR for you.

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You could take these definitions from MSCI as an example of how to proceed. They calculate price indices (PR) and total return indices (including dividends). For performance benchmarks the net total return (NR) indices are usually the most relevant.

In your example the gross total return (TR) is 25%.

From the MSCI Index Defintions page :-

The MSCI Price Indexes measure the price performance of markets without including dividends. On any given day, the price return of an index captures the sum of its constituents’ free float-weighted market capitalization returns.

The MSCI Total Return Indexes measure the price performance of markets with the income from constituent dividend payments. The MSCI Daily Total Return (DTR) Methodology reinvests an index constituent’s dividends at the close of trading on the day the security is quoted ex-dividend (the ex-date).

Two variants of MSCI Total Return Indices are calculated:

With Gross Dividends:

Gross total return indexes reinvest as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend-paying company. Gross total return indexes do not, however, include any tax credits.

With Net Dividends:

Net total return indexes reinvest dividends after the deduction of withholding taxes, using (for international indexes) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties.

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