Fo the sake of discussion - I have one investment consisting of one asset classs and I have the historical data for that asset class going back to
1926. Here are the givens:
- I have the investment account set up such that its total return is comprised of 4% Dividend and 6% Unrealized Gain. -- the account has a zero basis.
- The historical data is yearly total returns with dividends reinvested.
- My model will include both deposits and withdrawals to the account.
- I want to include an effective tax rate in the model to show the tax consequenses of the withdrawals as well as the dividends.
The only thing I want the model to show is how my present investment would do over the course of the historical data.
I realize that there are programs out there that can do this. Fidelity will take my portfolio and project it against hisorical data, but I would like to do this myself so I can expand it to my entire portfolio and various types of events affecting the portfolio.
My first cut was -- each year apply that years total return to the current balance.
Then is was pointed out that some of the historical returns were negative - and it went down hill from there.
- How do I account for the dividend with a negative total return?
- Since my model include withdraws and dividends - there are tax consequenses. My account has a total return of 10% -- how do I model this against a historical return of 25% or even worse -25%?
I searched the internet and could find any references to this particular circumstance. If anyone knows of a reference I can use I would appreciate it. If you can give me some pointers on how to accomplish this that would be great also.
Or it may be the wrong group -- if so I apologize.
Thanks,
JW
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