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.
220
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22
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7answers
5k views
Are Certificates of Deposit worth it compared to investing in the stock market?
Looking at roughly 0.05% for a CD to 5% for a stock portfolio. That's a huge difference in return. For example, with $10K, that's a 4.95 percentage point difference!
In general, does a diverse ...
14
votes
4answers
9k views
How can I determine if my rate of return is “good” for the market I am in?
I am considering a small investment to get started with. What percent rate of return is considered to be good return on investments made in a stock market?
I read somewhere that 25-30% is considered ...
12
votes
2answers
507 views
How do I account for newly added money when computing my rate of return?
I have a simple spreadsheet where I track the balance in my investment account. What should I do to handle new deposits in the account?
For example:
End of Day 1: balance = $100
End of Day 2: $...
11
votes
3answers
9k views
Is there a term that better describes a compound annual growth rate (CAGR) when it is negative?
When calculating rates of return for an investment or portfolio over time, whether to report or compare performance, one frequently calculates the Compound Annual Growth Rate (CAGR).
I've got a ...
10
votes
5answers
983 views
Are long-term bonds risky assets?
I think bonds are debt/loan and fixed-income, so they are risk-free, both short term and long term. But it seems like Bodie's Investment thinks long-term bonds are risky:
For example, assume that ...
10
votes
3answers
17k views
Calculate annualized return on stock with multiple transactions
I understand how to calculate the Annualized return on a stock when I have single purchase ie
(principal + gain/principal) ^ (365/days) - 1
but how is it calculated when I have multiple buys and ...
9
votes
4answers
3k views
Shouldn't a Roth IRA accumulate more than 1 cent of interest per month?
Ten months ago, I opened a Roth IRA with an initial principal of $1,000, invested in one of those "Target Date" retirement mutual funds. I also set up $100 automatic monthly contributions.
The ...
9
votes
2answers
5k views
Comparing IRA vs 401K's rate-of-return with dollar cost averaging
I have both an IRA in Vanguard and an old employer's 401k with Fidelity management. I would like to compare the performance between the two accounts over time, in order to determine if I should ...
9
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4answers
2k views
How to calculate the total return on buying a home?
How to calculate the total return on buying a home, considering things such as :
home value
down payment
constant mortgage payment (going from mostly interests at the beginning to mostly principal at ...
8
votes
4answers
13k views
How do top investors pull out 20% ROI?
I've been searching the ROI percentage of well known investors:
Warren Buffett (Berkshire Hathaway): 22% annual return between 1964-2005
George Soros (Soros Fund Management): 30% annual return ...
8
votes
4answers
15k views
How do I calculate yearly rate of return on my investments?
I have been investing since May 2013 and I wanted to calculate my average yearly rate of return.
For example:-
Date
May - 2013 - Total investment made ($1200)
January - ...
8
votes
5answers
777 views
Formula that predicts whether one is better off investing or paying down debt
This is more of a statistics/probability question but the implications for personal finance are obvious.
Let's say you have extra cash (assume tax-advantaged space is already maxed out) and are ...
8
votes
1answer
2k views
Yield of a municipal bond with a sinking fund?
How do I calculate my expected return if I buy a municipal bond at a premium with a sinking fund feature?
For example, I'm looking at a bond with a coupon of 5.5%, maturing July 2015, with the ...
7
votes
3answers
3k views
What is the “rule of 70” or “rule of 72” with regards to investment, and how do I apply it?
What is the "rule of 72" (sometimes called the "rule of 70") with regards to investment, and how do I apply it?
7
votes
3answers
6k views
401k compound interest vs other compound interest
Whenever I see the presentations or documents imploring me to invest in 401k and retirement, it always shows a nice graph showing a 7% compound interest and how less money saved earlier in your 20s ...
7
votes
2answers
4k views
How can I calculate a “running” return using XIRR in a spreadsheet?
I should say that I'm not married to XIRR, I just want to calculate the return on a running basis in a column next to dates, deposits and balances. Here's a screenshot of a simplified spreadsheet in ...
7
votes
2answers
27k views
What does Personal/Internal Rate of Return mean for a 401k?
My 401k statements show a "Personal Rate of Return" (also called Internal Rate of Return), and I am curious what this actually means.
Does this indicate how my funds are performing in the market? Or ...
7
votes
1answer
170 views
Is there a simple term to describe the non commutative property of decreasing and increasing a value by some X percentage?
I.e., $100 decreased by 20% requires an increase of (1/(1-0.2))-1) to return to $100. Is there a simple name that refers to this?
7
votes
1answer
271 views
Why adjust for inflation annually, as opposed to realising it after the holding period?
Why do investors offset their annual returns against inflation, when inflation isn't realised until the end of the holding period (when the investor is actually spending the money)?
An example:
...
7
votes
1answer
3k views
Do net returns on mutual funds include expense ratio?
I'm considering an actively managed bond fund (DODIX) versus an similar index fund (VBMFX). Both are high quality intermediate funds. The 10-year return of DODIX (exp ratio 0.43%) is 0.86% higher than ...
6
votes
5answers
326 views
Is there a term for the risk of investing in an asset with a positive but inferior return?
For example, say I invest in a 5-year certificate of deposit at 3% annually. Let's assume the bank delivers on time (no defaults). However, a month after I buy it, another bank offered a 4% 5-year ...
6
votes
1answer
5k views
How do we correctly sum up returns
Assume I have done 8 trades and calculated the profit (or loss) of each trade:
Balance PnL
100
102 2.00%
105 2.94%
103 -1.90%
101 -1.94%
98 -2.97%
97 ...
6
votes
3answers
14k views
How do you calculate the rate of return (ROR) when buying and selling put options?
How do you calculate the rate of return (ROR) when buying and selling put options?
5
votes
4answers
35k views
Typical return for an IRA? How can I assess if my returns were decent?
The year to date return on my IRA is currently 5.3%, the DJIA is 9.5%, and the NASDAQ is at 7.7%.
Is this normal or should I be disappointed? I'm just starting to pay attention to this kind of thing,...
5
votes
3answers
946 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,...
5
votes
5answers
10k views
Time-Weighted Rate of Return & Money-Weighted Rate of Return
Background
I am trying to figure out the computational difference between Time-Weighted Rate of Return (TWRR) and Money-Weighted Rate of Return (MWRR).
Let's say, I have a portfolio looking like ...
5
votes
1answer
498 views
Is this how to calculate annualized return?
For a savings account that is returning 2.0 APR, on $10,000, $200 in interest will be earned in one year.
If I have a return of 9% on a stock trade with a holding period of 3 months, is the ...
5
votes
2answers
2k views
Discussing real estate appreciation: Compound vs. simple interest?
When people say real estate has appreciated 8 % over the past 5 years, do they mean 8 % compounded annually? or simple interest annually?
5
votes
3answers
11k views
How to calculate the rate of return on selling a stock?
How to calculate the rate of return on selling a stock?
5
votes
1answer
206 views
Would high interest rates offset the issue of keeping money in a weak currency?
I am a UK resident and recently I managed to unlock an account in South Africa with FNB that my family had set up for me. The account is worth R90k (~Ā£5k). I have no intention of moving back to South ...
5
votes
1answer
475 views
How to determine desired/required value with “value averaging”?
As opposed to dollar cost averaging (DCA), value averaging (as described in this eHow article) is a technique where the investor determines the value the investment should have after a given time ...
5
votes
1answer
1k views
Calculating Simple Portfolio Returns with Rebalancing or Adding/Removing Securities
Given a set of portfolio weights, w, and historical security prices, I am looking to calculate a simple portfolio return via:
where R is the simple return for a given security from time t to t+1:
...
5
votes
4answers
917 views
What is a decent rate of return for investing in the markets?
This article indicates that the average rate of return for stocks is 4% after inflation, fees, and taxes (called "net-net-net" in the article).
In the article several investment professionals are ...
4
votes
3answers
658 views
If a mutual fund did really well last year, then statistically speaking, is it likely going to do bad this year?
I am a looking at a specific fund that made a killing last year. I know that this is a speculative question, but I am interested whether what I am saying held true over the years. Does a mutual fund ...
4
votes
3answers
23k views
What does the average log-return value of a stock mean?
Assuming log-return is defined by the log of the price today divided by the price yesterday.
Does knowing this single piece of information (the average log-return of a stock over a long period of ...
4
votes
1answer
253 views
Where to find the 5 or 10 year returns for a mutual fund?
Iām researching some mutual funds and am trying to find the 5 or 10 year return. However, all I can find is the YTD return.
For example, Yahoo Finance shows the Yacktman Focused Svc (YAFFX) has an 8....
4
votes
3answers
558 views
What is the theory behind Rick Van Ness's risk calculation in the video about diversification?
In the video, Rick Van Ness states the following scenario:
Stock A has a 7% return with +/- 1% risk
Stock B has a 3.5% return with +/- 0.5% risk
Stock A and B are perfectly negatively correlated.
A ...
4
votes
2answers
713 views
Calculating returns on a stock: different ways?
I am comparing two ways of calculating the total return on one stock over time and I would like to know if they both make sense.
When would you use one over the other and do they have specific names?
...
4
votes
2answers
1k views
How to calculate return for “negative” investment
I'm tracking a few investments, with a simple formula for total (non-annualised) return, which is (current_value - money_invested) / money_invested. For one of my investments, however, I already ...
4
votes
3answers
763 views
What evidence or research suggests that mid- or small-capitalization stocks should perform better than large caps?
In my 401k I have always allocated a greater percentage of my portfolio into mid cap funds because they seem to be riskier and have a higher upside. Yet, as of the past year or so, the large cap funds ...
4
votes
2answers
2k views
How can I figure out how much to bid on a parking space?
A nearby condo building is auctioning off 65 parking spaces within the building with no minimum bid. The condo is in the middle of the business district in my city. I'm interested in investing in one ...
4
votes
2answers
1k views
How do you calculate the annualised return of your portfolio from the annualised returns of each of your funds?
I've invested in a number of mutual funds, and I've calculated the annualised return of each of them, using a spreadsheet (and the xirr function).
I want to calculate the annualised return of the ...
4
votes
1answer
144 views
How do I maximise my returns when using margin in my brokerage account?
Suppose I have an investment account with $10,000 in it. I have a margin rate of 10% per year. For a total of $2.7 interest per day, or $1,000 per year.
I can invest in a high risk ETF with returns ...
4
votes
2answers
163 views
Calculator to compare mixed portfolio returns [closed]
I've had my IRA in Betterment for the past 2.5 yrs. Betterment invests in low fee ETF's only and charges 0.15%/yr in fess. They allow the user to manage their portfolio only by changing the ...
4
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3answers
1k views
How can I calculate yearly interest of my investment gain?
I'm trying to figure out the yearly interest of a potential investment. Lets say I invested $10 000, 13 days later i cash out and I now have $10 500. The interest here is 4,76% for 13 days.
But can I ...
4
votes
2answers
8k views
What are the standard industry practices or disclosures for computing compounded interest on retail deposit accounts in the United States?
I'm seeking to understand how my bank calculates the interest on my various deposit accounts (Money Market, Interest Checking, Savings, Certificate of Deposit) in order to simulate and predict it to a ...
4
votes
1answer
2k views
Calculating historic S&P 500 returns
I'm using the S&P 500 data provided by Robert Shiller which goes back to 1871.
I've then calculated the percent return for each month, the simple arithmetic average is 0.43%. Calculating the ...
4
votes
1answer
265 views
Use my savings to pay out my mortgage on my rental apartment?
My rental apartment at this point is making me a 5% ROI per year. My bank is currently charging me a 5.87% Interest rate on the mortgage, which means I am putting from my pocket to keep this apartment ...
4
votes
2answers
8k views
How is my 'Personal Investment Performance' on my 401(k) calculated?
My 401(k) shows the following:
my starting value at the beginning of the year
personal contributions
employer contributions
investment gains/losses
Closing value from Yesterday
Total Change
Personal ...
4
votes
1answer
2k views
How to quantify differences in return with low expense ratio vs high expense ratio mutual funds?
One often repeated piece of financial advice is to work to minimize your expense ratios in your mutual funds in order to maximize your returns.
While it is often straightforward to determine the ...
