Archive for January, 2006

# Compound Annual Growth Rate (CAGR)

### Mutual funds, Personal finance

In finance and investing, whether you’re looking at stocks or savings accounts, it’s often useful to calculate your returns to measure how you’re doing. One way is to calculate your . The best way I’ve seen this defined is in the investopedia.com dictionary (hence the link), which says:

CAGR isn’t the actual return in reality. It’s an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate. You can think of CAGR as a way to smooth out the returns.

Here’s the general formula for calculating CAGR:

CAGR = (ending amount / beginning amount)(1 / # of years) – 1

Read the rest of this entry »

# Compound Annual Growth Rate (CAGR) calculator (.xls)

### Corporate finance, Excel spreadsheets (.xls), Personal finance

Description: A simple MS Excel template (Office 2003) you can use to calculate CAGR given initial investment, ending investment, and # of years of investment, or ending investment or # of years of required investment given the other three inputs. To download this spreadsheet, right click on this link and choose “Save target as…” or “Save link as…” from the menu items. Read the rest of this entry »

# Part II: A (relatively) straightforward way to figure out your stock portfolio’s performance

### Personal finance, Value investing

Note: This is the second of a two part series on how to calculate your returns versus the market. You may want to read Part I, which contains additional background information.

The Nitty Gritty Steps

What you’ll need:

2. MS Excel (or use the provided simple template)
3. Purchase prices, purchase dates, # of shares for each investment held in your portfolio
4. Sale prices, sale dates, # of shares for each investment (if applicable)
5. Dividend history of each investment during the period you held it (optional, see below)

# Portfolio Performance vs S&P 500 spreadsheet (.xls)

### Excel spreadsheets (.xls), Personal finance, Value investing

Description: A simple MS Excel template (Office 2003) you can use to compare your portfolio returns versus SPY, an ETF that tracks the S&P 500 Composite Index. Greyed out areas are calculations and should not be changed. A few examples have been prefilled in blue.

You may use, distribute, and modify this spreadsheet however you wish. For more information on how to use it, read Part I and Part II of how to measure your portfolio’s performance against the market. Comments, corrections, additions, and suggestions are welcome below.

# Part I: Are you beating the market? How do you know?

### Personal finance, Value investing

Note: This is the first of a two part series on how to calculate your returns versus the market.

One of the things I’ve found both difficult to do as an individual investor and largely ignored by the individual investing community is the ability compare how your investments have performed versus innumerable other methods that exist out there. The most common benchmark against which a portfolio’s performance is compared is the “market”, and more often than not, the S&P 500 index. (This is not necessarily always the right benchmark to use, but that topic will be saved for a later discussion.)

Ask someone if they’ve beaten the market, and chances are, you’ll be told they have, or perhaps that they don’t know (magically, it seems no one ever underperforms the market). Read the rest of this entry »