Return on Investment

JoeCrystal

Hello, I got a question to ask:

At the moment, I am working out same approach to work out the total return on my investment and already I ran into a problem. At the moment, I am including dividends within the individual totals. Some is easy to do like with NG and scrip dividend, (just increase the holding and take into account of the cash balance.)

But in case of Gilt, there is interest and I used that interest to invest into another shares/gilts, (thus reducing the cost), should I remove that interest from the Gilt total or keep it there? Come to think of it, this also apply to true dividends as well, any thoughts?

Thanks

Aegis

If you're reinvesting the dividends, ignore them for the return purposes. (unless you've paid tax on them, in which case you might want to remove that to calculate the net return - otherwise you can just work out the gross return).

If you start out buying 1,000 units of a share and eventually have 1,250 due to reinvestment of unites, then the total return on your initial investment will already include the reinvested dividends if you just multiply the final total by the bid price and subtract the initial acquisition costs.

If you're working out the return for capital gains tax purposes, then you will need to treat dividends separately, otherwise I'd suggest not bothering.