Generally, I get it that there are two ways to calculate returns.
1) (End value – Start value)/(End value)
2) Using IRR calculation
The first method is simple enough, but will likely understate returns if you are buying new stocks and adding to your positions throughout the year (especially if this is the first year you're investing).
The second method (for now) seems bad as well cause it is overstating my portfolio returns, but will likely normalize once I can get a full year to analyze.
Anyways, for the second IRR method, I use the XIRR Excel formula. I just want to know if I am doing it correctly or not. In particular, with regards to the dividend. None of my stocks are set to auto reinvest. The dividend go back into my bank account, and I use it to buy more stocks in the future. Assume in my example below I reinvested the $20 dividend into buying Stock C.
Is it correct, and from the figures provided would 3.82% be my net returns at that point in time?
Would appreciate any and all input on this. Thanks!
Submitted July 16, 2017 at 08:42AM by learner1314