Annual Returns

darkidoe

bowlhead99 wrote: »

It doesn't surprise me that for the umpteenth time on this thread and your previous threads you asked a question because you don't know the answer or method, and then was told the method, and then came right back with something akin to 'yes just as I expected, I knew what to do all along'. Lord give me strength...


Really? But you told me that you "did just as you described" (adding a formulaic column of values next to the date column and percentage column), so you have seen all the numbers and you have the workings yourself, and even if you have not really done the workings yourself you have them in my post above.

So you know you started at 10000 and six years later ended at 13097.7. The money might not be worth the same in real terms because of inflation etc over the six years, but in cash terms the value you could 'cash out' at the end was 1.30977 times what was put in.

Are you really saying, I started investing £10000 and I know I ended with £13097.7, can someone give me the workings or explanation of how I should know that 13097.7 is a 1.30977 multiple of the starting value of 10000 ?


In simple terms:
If you started with 10000 and ended with 30000 we would say the ending value is 3x the starting value. If you wanted to work out the '3' you would divide the 30000 by 10000 and get it, or you could multiply 10000 by lots of different numbers and settle on 3 being the one that got you to 30000.

Likewise if you wanted to work out what multiple of 10000 is represented by a value of 13097.7, you could divide the 13097.7 by 10,000 and get 1.30977.

Perhaps the confusion is that you are thinking there is two alternative methods: (a) take the sequential returns to build up £10,000 to £13097.7, or (b) somehow know that it will be 1.30977 multiple without working it out.

That's not the case. You still have to multiply out the actual annual returns to get to the total 13097.7 value at the end.

What I was suggesting as the two alternative methods - once you've worked out that 10,000 turns into 13097.7 by looking at your table of data - is calculating the annualised amount from the total amount. To do that, you can either (1) put the two dates and two values into an xirr formula, or (2) note that you want to get the annualised version of a 6 year return and so take the sixth root of the 6-year multiple.

Afterthought - to get to 1.30977 total multiple from 6 periodic multiples of equal-length-periods, you can of course just pretend that £1 was invested instead of £10000 so the period end valuations just go 1.2 x 1 x 1.1 x 0.9 x 1.05 x 1.05 = 1.30977. Maybe that would be easier for you.

"Thanks, that's what I thought but just wanted to check"
"You're welcome" :rotfl:

Lord. Bowlhead. That's very helpful but you are one guy with a lot of time or very bored.

eskbanker

talexuser wrote: »

Another thread from capitalOne - turns out just as I expected all along!

Anticipating a sub-prime thread?

badger09

darkidoe wrote: »

Lord. Bowlhead. That's very helpful but you are one guy with a lot of time or very bored.

Bowlhead... given a peerage? :T:T:T:T

TBC15

Patience of a Saint.

badger09

TBC15 wrote: »

Patience of a Saint.

Saint Bowlhead? maybe going a bit too far:rotfl:

capital0ne

bowlhead99 wrote: »

Afterthought - to get to 1.30977 total multiple from 6 periodic multiples of equal-length-periods, you can of course just pretend that £1 was invested instead of £10000 so the period end valuations just go 1.2 x 1 x 1.1 x 0.9 x 1.05 x 1.05 = 1.30977. Maybe that would be easier for you.
:

Looks good to me :beer: