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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11
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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 ...
2
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2answers
344 views

Clarify Microsoft's explanation of MIRR

I don't understand Microsoft's MIRR example. The second parameter is the finance_rate: Finance_rate Required. The interest rate you pay on the money used in the cash flows. The example then ...
3
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3answers
772 views

When investing, is the risk/reward tradeoff linear?

Rule 1 of investing is that the more risk you're willing to take, the higher your potential for reward. Bonds are low-risk and come with maybe 1-2% returns, stocks much higher risk and maybe 5-15% ...
5
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4answers
906 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 ...
0
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1answer
94 views

What is the rate of return for a security when there is no risk-free rate (CAPM)?

Let say I want to invest 1000€ in cryptocurrencies in order to get 2000€ In the famous CAPM, the relationship between risk and rates of returns in a security is described as follows: For a security ...
2
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1answer
15k views

How to calculate the return over a period from daily returns?

If I have daily returns of my portfolio over a period (let's say January to December), how do I calculate the total return over the period or per month? What I did now is the following: Calculate ...
2
votes
1answer
984 views

Annualized Return vs CAGR of Investment

I am a bit confused by the the two terms 'Annualized Return' and 'CAGR' (compounded annual growth rate). The definition for annulized return is here. The definiton for CAGR I have taken from here. My ...
-1
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2answers
1k views

Investing/business with other people's money: How does it work?

I have heard of this phrased such as "OPM" -- basically, "other people's money." It's something said that, if you don't have the funds necessary to invest, use someone else's money. What does this ...
3
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4answers
289 views

Why is IRR used as a measurement of an investment's profitability?

I am new to money.SE so please forgive if this question is not in keeping with the norms of the site, and let me know how I can improve it. I have a fundamental question about concept of internal ...
7
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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 - ...
4
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2answers
708 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? ...
0
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1answer
703 views

How are average annual returns calculated on an index fund?

I am trying to understand the average annual returns on this index fund: VFTSX according to its data on Vanguard's Price & Performance page. It shows, under "Average annual returns", the ...
10
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5answers
937 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 ...
2
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8answers
11k views

Help me understand the oddity of percentage gains and losses?

If you start with $100K, and you get a 50% gain, it's $150K. Then, you get a 50% loss: now it's $75K. Reverse the order (i.e. lose 50%, gain 50%), it's the same thing (a 25% loss). So, 50% up then ...
8
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4answers
12k views

How do top investors pull out 20% ROI?

I've been searching the ROI percentage of well known investors. Warren Buffet - (Berkshire Hathaway) 22% annual return from 1964-2005 George Soros - (Soros Fund Management) 30% annual return ...
-2
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1answer
158 views

How do you calculate the RRR on a portfolio given component returns?

Imagine you invest in the following stocks: $11,600 of A, $7,800 of B, $14,900 of C, and $3,200 of D. The required returns on these stocks are 10.7%, 15.4%, 3.9%, 9.1%, respectively. What is the ...
1
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2answers
254 views

Should monthly return or annualized be used?

If I have an average monthly return on capital of 5%, is it more common to use that number for performance or use the annualized value of 60%? I believe the annualized value is what hedge funds and ...
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 ...
4
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3answers
688 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
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2answers
2k views

“Rule of 72” For Higher Multiples?

The rule of 72 states that if I earn n% interest, I can divide 72 by n and get the approximate number of years that I'll double my money. Suppose that I wanted to find out how many years to quadruple ...
1
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1answer
770 views

XIRR not working for this dataset. Any other method to calculate rate of return?

For this particular dataset xirr is not returning any reasonable value either in excel or google spreadsheet. What is the option to calculate the rate of return in cases like this?? Sl-no date ...
6
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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 ...
0
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1answer
317 views

When I calculate “internal rate of return (IRR)”, should I include cash balance?

When investing in the stock market, some methods need a cash balance in the broker's account. For example, a new investor has $20,000 to invest. She buys stock worth $10,000. The remaining $10,000 is ...
1
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3answers
804 views

Should I be disappointed with my investment returns?

I put $46,000 in an IRA 10 years ago. I have never made any additional deposits. The value is now $58,000. I feel it should be worth more. All of it is in mutual funds.
3
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3answers
401 views

Accepting high volatility for high long-term returns

According to modern portfolio theory investors can pick a trade-off between expected returns and volatility along a certain curve. If someone is investing for the very long term (decades until ...
2
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2answers
446 views

Calculate APY revolving loan with offset/staggered payment schedule?

I want to buy a weekly meal ticket, 7 lunches for $7, but do not have $7 today. Lender says, "I will loan you a consecutive series of 5 meal tickets for 5 consecutive weeks (35 consecutive lunches as ...
5
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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 ...
3
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1answer
371 views

How to compute real return including expense ratio

I am currently hesitating between 2 similar International Index Fund, FSIVX and FIENX. FSIVX have an expense ratio of 0.12% while FIENX have 0.63%. I can try to compare them side by side on google ...
7
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3answers
5k 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 ...
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1answer
1k views

How do I calculate the dividend yield for Disney Co?

I'm trying to "estimate" the dividend yield for Disney (NYSE:DIS). Let's pretend stock price will stay at $57 and the tax rate is 1%. Is it really the case that after 3 years with this stock the ...
0
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2answers
6k views

Why doesn't changing the Discount Rate change IRR?

I have an analysis for a real estate project done and I'm changing the discount rate but IRR is not affected. I don't understand why this is...? It seems that changing the discount rate would change ...
2
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1answer
1k views

If I lose 20%, what rate of return do I need to break even?

If the account is down 20%, what rate of return over the next year do we need to get to be even, in other words make back the 20% we lost? The rate of inflation in this case is zero.
1
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2answers
108 views

What price index should I consider when saving?

I was wondering if instead of using some official index, I should calculate my own index, putting in the equation all my expenses and calculate how poorer or wealthier I get over the years. Real ...
1
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3answers
122 views

In need of Algebra assistance

For some reason, my Algebra is getting rusty and I need help solving for the Purchase of the following: (Sale - Const - Purchase) / (Const + Purchase) = ROI
0
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1answer
256 views

What's the folly with this stock selection strategy

I am very leery of investing in Stocks over here. I have tested some other Asian markets and gotten some returns. Rather than have my money depreciate (less interest than Current Inflation ), I'd ...
2
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2answers
513 views

difference in cagr and irr

I am trying to understand the IRR, XIRR and CAGR functions better. See the link below for my examples. I am looking at a very simple example of 20K invested and 50K returned at the end of an ...
-1
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1answer
208 views

How do you calculate return on investment for a share of stock?

How do you calculate the return on investment for a single share of stock? For example, what would be the return/value of a single Google share now, if bought in January 2015?
3
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2answers
164 views

Understanding the personalized Rate of Return

In my 403k web site, I saw that my personalized rate of return as 4.25%. To understand it, I clicked the question mark. Your personalized rate of return (PRR) represents the specific performance ...
2
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1answer
67 views

Using Index Returns in Retirement Investment Planning

In retirement planning one of the inputs to a forecast is an assumption about return on investments... and there are a number of rules of thumb thrown around. 6%, 8%, something that goes from higher ...
8
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5answers
776 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 ...
1
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2answers
900 views

Cumulative Return between two dates

I have a table that carries data with cumulative return of some instrument. Data is described with start date, end date and cumulative return for date range (start-end): Start Date|End Date |...
1
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2answers
128 views

Why compare asset performance using returns, instead of using change factors?

Why do investors compare the returns of assets as opposed to the change factors of assets? E.g. comparing 6% / 4% instead of 106% / 104% to get the comparative performance of two assets. AFAIK ...
7
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1answer
267 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: ...
0
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1answer
51 views

What numbers to look for investment returns

I'm exploring the field of investments and would like to know roughly what numbers and estimates have to be looked at for a company that is going to become public soon. For instance, if I buy 10% of ...
1
vote
1answer
162 views

Incorrect XIRR value of installment loan? [closed]

Using a financial calculator I was able to determine the interest rate of an installment loan with principal of 14975, payments of 444.56 and 60 month term is .2557%. However, when I put the loan ...
-1
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3answers
339 views

What return are you getting on your money from paying down a mortgage on a rental property?

If you bought a $200,000 rental home with 20% down, what is the return on investment you're earning over the full 30 year period from paying down the loan using the rental income? We will assume the ...
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 ...
3
votes
3answers
260 views

Is this Employee Stock Purchase Plan worth it when adding my student loan into the equation?

Here are the details of my company's Employee Stock Purchase Plan: An automatic 5% purchase discount off the fair market value of the stock. Payroll deductions start on July 1st. The stock purchase ...
2
votes
1answer
383 views

Excel formula for calculating interest rate of earning

On January 1st I invest 1238. I do this every January 1st for 20 years. At the end of 20 years (So December 31st of the 20th year), I have 32880 in the account. What's my rate of interest? By playing ...
4
votes
3answers
22k 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 ...