Questions tagged [rate-of-return]

For questions relating to various measures of the rate of return on an investment, e.g. Internal Rate of Return, Financial Management Rate of Return, etc. Note that questions about these terms that don't apply to personal finance or actual problems you face, e.g. homework questions, are probably off-topic.

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32 views

What am I missing with this XIRR calculation?

I have 70K at the beginning of the year invested in some fund with the below yield each month, is it correct that the IRR would be 50.90%? What am I missing? In some article that I've read, they were ...
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103 views

0% rate of return + inflation differs from inflation alone

Given that Real Rate of Return = (1 + nominal rate) / (1 + inflation rate) -1 If my nominal rate equals the inflation rate I get 0, meaning that my money is worth the same no matter the inflation ...
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21 views

Derive Initial investment based on Compounded returns

I know the investment instruments, their average yearly returns, the duration of investment and the target corpus. Based on the target corpus and the average returns, I want to reverse engineer and ...
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45 views

Average Annual Total Return - How to calculate fractional number of years?

Per the SEC Form N-1A, P(1+T)n = ERV Where: P=a hypothetical initial payment of $1,000. T=average annual total return. n =number of years. ERV= ending redeemable value of a hypothetical $1,000 ...
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19 views

TWR and final withdrawal

When calculating TWR for an investment, what is the best way for calculating the return of a period that ends with the withdrawal of the funds? When there is a withdrawal of the funds, the last period ...
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2answers
88 views

Comparison of expected returns from index funds and single shares

I shall start by saying I know little about markets, investing or gambling, but I do know a little bit about probability. This question is prompted by comments to this question, such as "As a ...
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1answer
180 views

Why would banks offer negative interest rates?

I recently saw news that Danish bank Danske Bank is going to be offering -1% return on balances over $16,000. Obviously nobody wants a negative return on their balances so nobody is going to want this....
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106 views

calculating stock investment return

Please help. I am stuck. I am still pretty new to investing, so please be nice and a simple explanation is much appreciated. I want to calculate the capital gains (NO DIVIDEND) annual return of a ...
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31 views

Comparing ROI taxed at ordinary income vs cap gains?

How can I demonstrate the performance of an investment that's taxed as ordinary income to one that's taxed at cap gains rates? I run a small real estate investment fund, focused on flipping properties,...
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2answers
136 views

What is the highest return risk-free investment available?

Investing is about balancing risk and reward. Any good investment will typically allow for nominal risk for a healthy return, but let's suppose that's not what I'm looking for. I want something with ...
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1answer
41 views

Calculating the rolling performance of two securities over time

If I want to compare the relative price performance of two equities, an easy way would be to calculate the Comparative Relative Strength (CRS) and graph the result. The calculation is simple. Divide ...
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1answer
67 views

How to calculate effective rate of return for annuity payments and annuity receipts?

There is an annuity annual payment of 100000 from year(s) 1-7. After these payments, there are annuity annual receipts of 153127 from year(s) 8-15. I want to know what is the effective return on this ...
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42 views

Proper way to annualize returns

Searching for "how to annualize interest rates" on Google leads to the following results: Wikihow's How to Annualize a Percentage Investopedia's Annualized Rate of Return Wikihow ...
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1answer
35 views

Computed 401K RoR differs from broker's information

I have a 401k through Fidelity and have recently started being more active in the market. I was haphazardly selecting funds that seemed to do well but apparently wasn't the most advantageous due to ...
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1answer
51 views

The logic behind IRR

I can't still completely understand the logic behind the calculation of IRR. It's all clear with NPV. Let's use simple example: NPV = CashFlow / DiscountRate 100 = 110 / 1,1 But with the IRR..., the ...
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53 views

Is total rate of return for a stock posted on financial web sites?

I am a beginner trying to teach myself investing. I have read that it is important to look at the total rate of return for the stock when evaluating it (1, 3, 5 years). I understand the logic behind ...
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83 views

personal portfolio return calculation problem

I want to measure and evaluate the performance of my personal portfolio. However, I am concerned about confusion and miscalculation. Because when I calculate the time-weighted portfolio return rate in ...
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134 views

How to calculate ROI on my stock portfolio, from transactions logs?

I have a spreadsheet that contains all my current stock positions in one sheet (with how much I invested and the unrealized gain for each current position) and another sheet with my past positions (...
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1answer
69 views

Futures and dividends

Let's say I have a portfolio of futures for a long period (let's say 2000-2020). All of my underlyings are equity indices. I am always invested in the next maturity futures (thus I never wait for the ...
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1answer
75 views

Why do the paid prices for an accumulating ETF share follow the current net asset value per share?

It is pretty clear; if you hold a share of a distributing ETF, which is replicating a stock market index like S&P 500 for example, then you can count on regular dividends paid by the the ...
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3answers
159 views

Why do value investors obsess over finding intrinsic values instead of discount rates (expected returns)?

From what I read about value investing, value investors seek to buy stocks that sell below their "intrinsic value". To that end, they use stock valuation models to find the all-important &...
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213 views

Are government bonds really risk-free?

When I read finance textbooks, I read things like "assume that the risk-free rate is equal to the yield on 30-year government bonds", "the government bond earns at the risk-free rate&...
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1answer
72 views

Investment choices for 403(b) and 401(k): How to predict future performance?

My wife and I are in our 30s and live in the US. We have several retirement accounts, which include an old 401(k), her current 401(k), and my current 403(b). These 3 all allow us to choose our ...
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1answer
41 views

Difference between 7-Day Yield and Average Annual Total Returns?

I'm looking at "FIDELITY GOVERNMENT MONEY MARKET" and there's two numbers: 0.01% 7-Day Yield and 0.75% Average Annual Total Returns. I don't understand the difference between these two ...
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317 views

Are there ways for me to generate $40k per year in perpetuity from $300k? [closed]

Why or why not? Even if I did get $40k once, how unlikely is it to happen again? Some obvious answer are getting a job paying $40k a year (reasonable, but not what I'm asking) and spending the ...
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1answer
86 views

Not understanding the calculations done in the book

I was reading "The Intelligent Investor by Benjamin Graham" and came across a series of calculations that I'm not getting as to how it has been arrived at. I'm quoting the entire text from ...
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42 views

Relevancy of IRR versus CAGR as a Decision Making Tool

Why is IRR an important metric for comparing investments if CAGR can be determined? I understand CAGR to mean the constant rate of compounded growth over a given number of years. That is, the slope ...
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1answer
106 views

Is it good to invest in mutual fund during the down time in market?

Say there is a mutual fund and its annual return in the past 3 years i.e. 2017, 2018, 2019 were -10%, +20%, and -10% respectively. A and B invest $100 in this fund at different time points. A ...
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1answer
38 views

Testing the CAPM using the Fama-MacBeth (1973) Approach

I need to conduct the Fama-MacBeth (FM) procedure for my thesis to test the ability of the Fama-French (2015) and Carhart (1997) six-factor model to predict future expected returns. In univariate ...
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1answer
62 views

Comparing two options of investment

An investor is considering to buy a property. It costs $200.000,00 and it will allow him to receive $28.000,00 during the first year (which will decrease $300,00 per year). If he buys this property, ...
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56 views

Trying to understand the investment 'fundamental returns' definition by John C Bogle (what is earnings growth?)

I have been reading a book written by John C Bogle. One of his quotes is: The reality is that the fundamental return, the dividend yield plus the earnings growth of companies I'm trying to ...
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1answer
87 views

Calculation of YTD return in case of portfolio rebalance

I want to calculate a couple of metrics for portfolio. However, only examples I can find over the internet do not cover portfolio rebalances. Suppose the following scenario: Jan 1st, buy portfolio ...
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2answers
171 views

Mathematical proof of rate of return after tax

It is well known in engineering economic that rate of return after tax can be computed by multiplying tax rate and nomial rate of return which is the rate of return before tax. This relation is known ...
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173 views

Is the S&P500's excess return above Treasuries after investing monthly for forty years really 3.6% annualized?

I was playing with Robert Shiller's U.S. Stock Markets 1871-Present and CAPE Ratio dataset to simulate an investor who buys the S&P500 with their monthly savings—equal to that month's CPI—for the ...
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1answer
57 views

How to calculate mean annualised returns

I am trying to calculate the mean annualised return for a fund using historical monthly returns but I am having difficulty in finding an appropriate method to do so. Many studies have used mean ...
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2answers
757 views

All-in-one international ETF vs weighted region-based ETFs performance

If you only consider returns (and not trading fees or total expense ratios or tracking errors as mentioned by D Stanley below), what would be the difference between a single ETF and several ones ...
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1answer
61 views

Help to understand money market fund total return

Take Schwab money market fund as an example - On the page of SWVXX, the following information is listed - yields: 7-day yield (without waivers) - 1.44% net expense ratio: 0.34% returns (annualized): ...
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1answer
156 views

How to interpret returns on index funds

I don't quite understand how investing into index funds works, or how to interpret the average historical returns. Let's say that, 10 years ago, I decided to invest $30,000 dollars at the end of each ...
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3answers
1k views

Why do people claim that Stock Markets are broadly exponential in the long term?

I've always heard Stock investment being described in terms of getting X% return per-year in the long-running. But looking at the FTSE in the long-term doesn't suggest an exponential growth? See below,...
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43 views

Calculating return - mix of ROI and TWR

I've got a portfolio with a mix of buy and total sell and some with a mix of buy and partial sell. For the buy and total sell, a simple ROI calculation will work BUT given there are also a mix of buy ...
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1answer
60 views

How to calculate monthly return on a changing capital base when swing trading?

I'm just starting out in swing trading, and I'm facing a somewhat nagging doubt. Since last January I executed 27 trades, with varying results. I am tracking down the percent return on each trade ...
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3answers
188 views

calculate equivalent yearly interst rate on house purchased with a mortgage

I've got 60k and I'm looking at buying a house for 145k. The bank offered me a 20 year loan of 100k at ~1.8% interest rate. After 20 years I would have repaid the bank around 16k, according to their ...
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212 views

How do I calculate annual return for each of the 5 years from monthly historical data?

How do I calculate the annual return for each of the 5 years from monthly historical data? How do I account for stock split and dividends in the year? I'm not sure if this is the way to calculate. ...
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433 views

Does investing in the S&P 500 for 3 years yield better yearly returns than investing for 15 years?

I know that my logic is missing something crucial as I always assumed that the longer you leave your money for the closer it approaches to the long term average return. I was just reading this ...
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2answers
282 views

Calculate T-Rex score step by step

I am having problem calculating T-REX Score which is given here https://larrybates.ca/t-rex-score/. I can calculate my T-REX Score by putting my data in the calculator given in that website. But I ...
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1answer
214 views

Do low cost ETFs or mutual funds really do well for an investor?

There are many ETFs, Mutual Funds and Unit Trusts in the market. Some ETFs advertise a low Expense Ratio and Total Expense Ratio. There are many examples: IVV, VOO and SPY for S&P 500 VNQ, RWR ...
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57 views

Options trade - statistically expected return calculation?

I also asked this question here, for it to get more visibility. I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, ...
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3answers
314 views

How to annualize a loss of 100% for an investment?

Assume, I lend someone money against a certain fee or interest (charged at the day the loan gets repaid). The loan defaults and I get no fee or interest back. Hence, I have a return of -100% as all my ...
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1answer
56 views

Are divisions of returns linear?

If I have an annualized 5% return on $2,000, which is $100, can I always say that each 1% is $20? If that is the case, then this linear division of an annualized returns can be applied to more ...
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122 views

How to handle annualizing returns over short time interval leading to huge annualized return?

When calculating the annual return of an investment (as (1 + return in %)^(365/days)-1) over a very short time period - say 2 days - my annual return explodes due to the exponential term, which I ...

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