questions for Performance measurement of stock portfolio in Quicken 2005 premiere home and business

See below.

Thanks for helping! Here are a few more complicated scenarios. Am I doing this right?

===Scenario==Open Account Deposit $150 into account on 1/1/04 Buy $100 of XYZ on 1/1/04 Withdraw $50 from cash on 6/30/04 Sell all of XYZ for $125 on 12/31/04 Current value for XYZ is at 0, because all was sold and I have $125 in cash,

I calculate the following FOR THE WHOLE ACCOUNT, not just the XYZ shares return.

Return = current value + income taken out as cash + cash received from sales of shares - amount invested = 0 + 50 + 125 - 150 = $25

Annualized Return (IRR) = (simple because only 1 year) = same as ROI, or 17% as calculated below.

ROI = Return / Amount Invested = $25 / $150 = 0.167 =~17%

REPEAT the above for security XYZ ONLY, not the total account including the cash balance. Return = 0 + 0 + 125 - 100 = $25 IRR = 25% = ROI (becasue only 1 year)

Regarding my question (5) above:

I was referring to the PAST 10 years that i've been investing. (Nice job cutting to the heart that getting rich investing isn't easy.)

Now that I've gotten all of my data into Quicken, I'm creating an analysis to evaluate my past performance. I was just looking for other people's experiences in evaluating their own porfolio.

WHAT reports do you all generate? I'm making IRR, Return and ROI reports, benchmarking to indexes, and the industries my securities trade in... but what else should I be doing to evaluate my past decisions (and learn from them!)

Your calculation for XYZ stock is correct (because there are no cash flows). However, for the account, you need to adjust your formula slightly to account for the mid-period cash flow.

As you know, return is always calculated as Earnings / AmountInvested. When there are no cash flows, the formula is simple. As with XYZ, you made $25 on a $100 investment for a return of 25%. You did this over a one-year period, so the annualized return is also 25%. If you did it over 2 years, your annualized return would be 11.8%.

For the account, you have to modify the AmountInvested to account for the cash flow. You started with $150, but took out $50 half way through the year. So you had an average of $125 invested for the year. The investment industry would calculate your return as $25 / $125 = 20%. This formula is called Modified Dietz and is the standard used as mandated by the CFA Institute. The opening balance is adjusted by the number of days each cash flow has been in the account for the period.

IRR works slightly differently. IRR would solve for i in the following equation:

150*(1+i)^1 + (-50)*(1+i)^.5 = 125

IRR would first guess a 10% return, and get a result of $112.56. That's less than the account value, so the rate must be higher. It would try something like

15%, resulting in $118.88. Eventually, it would get to the correct result of 19.82%.

Hope this helps.

Good questions. Your best bet is to post a new message, as this one won't get a lot of viewing as it's deep into the thread. A new question will get your widest audience. As this question is not Quicken-specific, you could also post it to any one of the investment groups.

thanks alot, a-lot!

you've been very helpful and i am grateful

I'll second that.