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This is how I do it.

ROI = (Balance at end of year - contributions - balance at beginning of year) / balance at beginning of year

Note, that this isn't the proper way to treat contributions. Using the irr function in excel is far better.

However - if your contributions are small percent of your portfolio, then the error of my method is quite small. In my case, my contributions per year are less than 5-10% of the portfolio.

I like the ease of this simple method - it doesn't really matter to me if my calculation isn't perfectly accurate.
 

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Discussion Starter #6
I use the simple approach in excel, but my OCD compels me to look into more accurate figures. But if I go that far, I'd have to figure in inflation and taxes, and that'll difficult to automate...

I'll give the IRR() a shot.
 

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I'm an excel addict. Can't live without excel. I thought my addiction to excel was maybe excessive until last year (when running an employment ad) i received a resume in excel.. lol.. i was favorably impressed.
 

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I'd suggest we form a support group but I don't think that an addiction to Excel has an detrimental effects on my life. Hello, SOLVER! You are magical.
 

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I've just started looking into this myself. I use the excel function
XIRR(): Calculates the internal rate of return for a list of payments which take place on different dates (IRR() doesn't deal with dates).
 

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Oh man, Greg, you just lost me hours of my life in the upcoming week. I had no idea about the XIRR function. That's going to make for some fun excelling!
 

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Oh it's completely useless, slacker, except for vanity's sake of course ;) I'll really only need it in 32 years (extrapolated) when I retire and want to figure out my life long return!
 

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XIRR works good, but I'm still not sure how useful this number is.
I think it's a good idea to track your investment returns.

1) If you have a certain investing "style" then it you can measure against a benchmark.

2) If you have a bad year, you can go back and look at some of the previous (hopefully) good years to make yourself feel better.

3) If you have a blog, then you can post your returns at least once a year. :)
 

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Yes, I can use this to benchmark against say the TSX. But there doesn't seem to be a TSX index that takes into account for dividend reinvestment... I think there's one for S&P500, but that's in US dollars. Gah, people with OCD should not be allowed near excel and financial data.
 

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Yes, I can use this to benchmark against say the TSX. But there doesn't seem to be a TSX index that takes into account for dividend reinvestment... I think there's one for S&P500, but that's in US dollars. Gah, people with OCD should not be allowed near excel and financial data.

Indexes never account for dividend reinvestment, but there are a number of places that publish total returns. I think Morningstar etc would be a good source.
 

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hi:

I don't really track it. I have annual net worth statements going back almost a decade. If I get really bored, I can estimate returns from this data. This isn't done often.

hboy43
 
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