Thread: Tracking your Annual +/- % returns

Welcome brian! I use an excel spreadsheet to track my return. There's an example you can downloadon http://www.tsptalk.com/utilities.html. If you know excel, you can probably see what I am doing. basically I add a new row each time I change my allocation.

I know others hereuse other products like Quicken, and that may be a better option.

Thanks for joing us!
Tom

Calculation for annual return assuming $100000 beginning balance, $12000 in annualcontributions, andending balance of $124000:

(124000-6000)/(100000+6000) = 1.113

or

11.3%

You needto make sure to factor in your contributions or you will overestimate your return.

I found this method for computing annual returns in William Bernstein's "The Four Pillars of Investing."

Also, contributions should include your contributions and the government match or you will overstate return.

Pete, you get major props for posting that. My original estimates were a bit off due to simply doing a "divide the gain by initial+contributions then multiplying by 100". So, all of my returns were undervalued. That's right, I am slightly smarter than I thought I was... (so Pete, I am going to blame you for any overconfidence I have from now on).

Thanks for the kind words, Mike. I was very pleased to find this method in Bernstein's book.Very simple to calculate. Glad to hear it helped your return :^

Pete1 wrote:

Calculation for annual return assuming $100000 beginning balance, $12000 in annualcontributions, andending balance of $124000:

(124000-6000)/(100000+6000) = 1.113

Hi Pete,

Can you explain this calculation a little more? Are you adding and subtracting 6000 because it is half of your annual contributions? Thanks.

Dave

Yes, 1/2 of total annual contributions are subtracted from the ending balance, 1/2 of total annual contributions are added to the beginning balance. As noted, I got the formula from Bill Bernstein's "The Four Pillars of Investing". I apologize but I do not have the page number and I have returned the book to the library and so, don't have the full explanation provided for the calculation by Bernstein. I am not a math wizard, either, and so, the simplicity of the formula was appealing to me.

Pete1 wrote:

Calculation for annual return assuming $100000 beginning balance, $12000 in annualcontributions, andending balance of $124000:

(124000-6000)/(100000+6000) = 1.113

or

11.3%

You needto make sure to factor in your contributions or you will overestimate your return.

I found this method for computing annual returns in William Bernstein's "The Four Pillars of Investing."

Also, contributions should include your contributions and the government match or you will overstate return.

Okay, I'm not understanding this for some reason. Why not do away with the contributions all together. I get 12 % return? $124000 - contributions($12000) = $112000. $112000 - original balance($100000) = $12000. $12000 / $100000 = 12%. That's what I get anyway. Please explain if you don't mind. Thanks....

It is a nice simple way to figure out what you have gained the idea is that your constantly investing and your contribution is only in half the time as it is ongoing. It will get you a lot closer to the actual percentage as you ended up with 12% and the calculation shows .113%. That is why the formula is used. It is really nice to use to set up goals as with the formula you can tell what you need, to gain a 10% increase on your investment and is very simple.



mlk_man wrote:

Pete1 wrote:

Calculation for annual return assuming $100000 beginning balance, $12000 in annualcontributions, andending balance of $124000:

(124000-6000)/(100000+6000) = 1.113

or

11.3%

You needto make sure to factor in your contributions or you will overestimate your return.

I found this method for computing annual returns in William Bernstein's "The Four Pillars of Investing."

Also, contributions should include your contributions and the government match or you will overstate return.

Okay, I'm not understanding this for some reason. Why not do away with the contributions all together. I get 12 % return? $124000 - contributions($12000) = $112000. $112000 - original balance($100000) = $12000. $12000 / $100000 = 12%. That's what I get anyway. Please explain if you don't mind. Thanks....

Great explanation, Cowboy. I presented this approach for simplicity but I am willing to admit that I did not have a full grasp of why the contributions are split the way suggested by Bernstein. Your explanation makes a lot of sense.

Pete1 wrote:

Great explanation, Cowboy. I presented this approach for simplicity but I am willing to admit that I did not have a full grasp of why the contributions are split the way suggested by Bernstein. Your explanation makes a lot of sense.

This formula works good for a bench mark and is very simple to figure out where you would be if you were sticking your money in and not moving it. Heres how I use it. Example say I have 50,000 at the begining of the year and I am inputing $10,000 a year. The price of C fund was worth $11.61 per share on 1/2/04. This would mean I would have 4306.6322 shares on this date. I would addwhat I have imputed up to date say $6000.00 divide it by $11.61 = 516.7959 shares more totaling shares of 4823.428 shares and multiply it by todays price of $12.03= $58025.84 + $4000. more to stick in to total $62,025.84 at the end of the year if your ahead of this or on track with this figure your ahead of this market at the end of the year. This is just a bench mark not an exact science but avery good one to use I think. You can carry this further into say splits if you want to. Anything simple I will use if it's complicated and takes me all day to figure out I don't use it.