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15-04-2014, 03:59 AM
(This post was last modified: 15-04-2014, 04:00 AM by GPD.)
I think there is a different if you considered the performance of the idle cash as well. If every month you set aside say $300 from your pay to invest then your return is 21% based on XIRR but say if you allocated $3600 at the start and transfer $300 very month into a Plan (say call it Plan A) then together with the idle cash (say Plan B) the XIRR will be just 11%.
Date Plan A Plan B Plan (A+B)
12-Feb-14 -$300 -$3,300 -$3,600
12-Mar-14 -$300 $300 $0
12-Apr-14 -$300 $300 $0
12-May-14 -$300 $300 $0
12-Jun-14 -$300 $300 $0
12-Jul-14 -$300 $300 $0
12-Aug-14 -$300 $300 $0
12-Sep-14 -$300 $300 $0
12-Oct-14 -$300 $300 $0
12-Nov-14 -$300 $300 $0
12-Dec-14 -$300 $300 $0
12-Jan-15 -$300 $300 $0
12-Feb-15 $4,000 $0 $4,000
XIRR 21% 0% 11%
So the performance of you Plan A is 21% and Plan B is 0% giving an overall 11%.
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To overcome problem of idle cash, i figure out to use "Virtual Cash" that is 2 to 3 times of my portfolio value. This Virtual Cash is tracked for all transactions.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(15-04-2014, 03:59 AM)GPD Wrote: I think there is a different if you considered the performance of the idle cash as well. If every month you set aside say $300 from your pay to invest then your return is 21% based on XIRR but say if you allocated $3600 at the start and transfer $300 very month into a Plan (say call it Plan A) then together with the idle cash (say Plan B) the XIRR will be just 11%.
...
So the performance of you Plan A is 21% and Plan B is 0% giving an overall 11%.
Yes, in other words, the opportunity cost of the idle cash is 10% over the period.
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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GPD is right if you allocate everything and deduct monthly.
1-Jan-14 -$3,600.00 Allocate 3600
12-Jan-14 $300.00 Deduct monthly
12-Feb-14 $300.00 Deduct monthly
12-Mar-14 $300.00 Deduct monthly
12-Apr-14 $300.00 Deduct monthly
12-May-14 $300.00 Deduct monthly
12-Jun-14 $300.00 Deduct monthly
12-Jul-14 $300.00 Deduct monthly
12-Aug-14 $300.00 Deduct monthly
12-Sep-14 $300.00 Deduct monthly
12-Oct-14 $300.00 Deduct monthly
12-Nov-14 $300.00 Deduct monthly
12-Dec-14 $300.00 Deduct monthly
12-Jan-14 -$300.00 Invest monthly to Plan
12-Feb-14 -$300.00 Invest monthly to Plan
12-Mar-14 -$300.00 Invest monthly to Plan
12-Apr-14 -$300.00 Invest monthly to Plan
12-May-14 -$300.00 Invest monthly to Plan
12-Jun-14 -$300.00 Invest monthly to Plan
12-Jul-14 -$300.00 Invest monthly to Plan
12-Aug-14 -$300.00 Invest monthly to Plan
12-Sep-14 -$300.00 Invest monthly to Plan
12-Oct-14 -$300.00 Invest monthly to Plan
12-Nov-14 -$300.00 Invest monthly to Plan
12-Dec-14 -$300.00 Invest monthly to Plan
12-Jan-15 4000 Investment Return
XIRR 10.8%
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(15-04-2014, 08:10 AM)Temperament Wrote: To overcome problem of idle cash, i figure out to use "Virtual Cash" that is 2 to 3 times of my portfolio value. This Virtual Cash is tracked for all transactions. So the current VC - the original VC = ABS return for all the years of investments. Not taking current value of unrealised P & L balanced portfolio.
20 to 26 years tracking of every transactions in stock market is never going to be a walk in the park if without a very good financial software to boot. imho.
WB:-
1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.
Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.
NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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(31-12-2013, 11:54 AM)smallcaps Wrote: (31-12-2013, 10:23 AM)jovialger Wrote: Hi all
Like to check with you if I am doing the XIRR function correctly. I do not have a separate bank account to track available cash for stock investments, and just want to use XIRR to compute the returns from my stock portfolio (no idle cash).
Start of year 1 (1/1/xx): -(market value of portfolio)
Date: -(purchases)
Date: + Div received
Date: + sales proceeds
End of year 1 (31/12/xx): +(market value of portfolio) or A
--> Compute CAGR for year 1 using XIRR
Start of year 2:-(market value of portfolio or A)
repeat the process
Eng of year2: +(market value of portfolio or B)
--> Compute CAGR for year 2 using XIRR
---> compute another overall CAGR for whole investment period of 2 years.
Is the above method acceptable for my purpose?
Thanks for your advice.
Not really, xirr used in this way is more like computing the efficiency of trades. It does not compute the actual return of a portfolio over a year. Meaning it would not be comparable to STI/funds if that is wat u want...
The way jovialger has recorded things, cash injection isn't included, ie no idle cash. The only time cash is injected is when there is a buy transaction.
Assuming, there is cash injection, how should it be recorded?
Date: followed by +cash value injected?
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19-04-2014, 11:34 AM
(This post was last modified: 19-04-2014, 11:35 AM by corydorus.)
Easy. By treating your free cash as a virtual stock. The return will be minimal in saving accounts i suppose. But you can track it.
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19-04-2014, 02:03 PM
(This post was last modified: 19-04-2014, 02:12 PM by Ferns.)
(19-04-2014, 11:34 AM)corydorus Wrote: Easy. By treating your free cash as a virtual stock. The return will be minimal in saving accounts i suppose. But you can track it.
I think it's the + and - that confuses me.
Consider this scenario:
On 1 Jan 2014,
Free cash = $30000
Portfolio value from 2013 is $20000
On 1 Feb 2014,
Buy $10000 worth of shares
On 31 Dec 2014
Free Cash = $20000
Portfolio value = $31000
How should this be recorded?
1 Jan 2014 (20000)
1 Jan 2014 30000
1 Feb 2014 (10000)
31 Dec 2014 31000
**I get an error in XIRR when I recorded it this way, not sure why...
Then on 1 Jan 2015, it will be
1 Jan 2015 (31000)
1 Jan 2015 20000 Free cash left over from 2014
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I don't understand how to record if cash is treated as virtual stock.
If cash is treated as virtual stock, it means that the cash is assigned a "-" value.
Then how do you record a buy transaction if you use free cash to buy a stock?
If you assign a "-" value to the buy transaction, you would be double minussing...
Or you simply don't record the buy transaction?
Then at year end, just treat portfolio value and free cash as a positive value to calculate XIRR?
Right?
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(19-04-2014, 02:03 PM)Ferns Wrote: (19-04-2014, 11:34 AM)corydorus Wrote: Easy. By treating your free cash as a virtual stock. The return will be minimal in saving accounts i suppose. But you can track it.
I think it's the + and - that confuses me.
Consider this scenario:
On 1 Jan 2014,
Free cash = $30000
Portfolio value from 2013 is $20000
On 1 Feb 2014,
Buy $10000 worth of shares
On 31 Dec 2014
Free Cash = $20000
Portfolio value = $31000
How should this be recorded?
1 Jan 2014 (20000)
1 Jan 2014 30000
1 Feb 2014 (10000)
31 Dec 2014 31000
**I get an error in XIRR when I recorded it this way, not sure why...
Then on 1 Jan 2015, it will be
1 Jan 2015 (31000)
1 Jan 2015 20000 Free cash left over from 2014
1 Jan 2014 (50000)
31 Dec 2014 51000
The purchase is not considered since it did not require an injection of capital (draws from idle cash instead)
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