I would like to think I am quite good at mathematics (and Excel) but this one has me a little beat.
When our daughter was born we immediately set up a managed fund to which we shall contribute $100 per month until she turns 18. (How we'll use that money for her I'm not sure !)
That was in Aug 2001. In Aug 2002 we increased the contributions to $105 per month as a vague way of keeping up with inflation (and will continue to do so each year hopefully). The fund pays distributions quarterly revolving around 30th June. Distributions are reinvested by buying additional units.
(As an aside, the stock-market has taken a battering and based on the amount we have deposited since then and the current unit price, we are behind by around $300 (ouch). But, 18 years is a very long term time frame, so this volatility in the market is nothing I wasn't expecting).
How do I calculate the Rate of Return for an investment of this type, given that the contributions vary (including the distributions)?
My thinking goes something like this:
If I look at each individual purchase of units (ie. each monthly investment, and each distribution amount which is reinvested), then I know the date it occurred, I know the amount, I know the current (todays) date, and I know the current (todays) unit price. For that one "parcel" of units I can therefore say something like:
"I bought $100 of units on 20th Oct 2001 at $3.3582 per unit, giving me 29.77 units. Today's date is 20th Oct 2002, current sell price is $3.6591 per unit. Therefore that $100 has increased to $108.96, over exactly 1 year, which is 8.96% return.
Whether that's appropriate or not, I don't know - but I sure can't figure out a way to use this information to calculate some kind of overall return.
The exact same issue would apply to anyone who purchases irregular parcels of shares for the same company.
Anyone able to help me?
Thanks
Kevin.
When our daughter was born we immediately set up a managed fund to which we shall contribute $100 per month until she turns 18. (How we'll use that money for her I'm not sure !)
That was in Aug 2001. In Aug 2002 we increased the contributions to $105 per month as a vague way of keeping up with inflation (and will continue to do so each year hopefully). The fund pays distributions quarterly revolving around 30th June. Distributions are reinvested by buying additional units.
(As an aside, the stock-market has taken a battering and based on the amount we have deposited since then and the current unit price, we are behind by around $300 (ouch). But, 18 years is a very long term time frame, so this volatility in the market is nothing I wasn't expecting).
How do I calculate the Rate of Return for an investment of this type, given that the contributions vary (including the distributions)?
My thinking goes something like this:
If I look at each individual purchase of units (ie. each monthly investment, and each distribution amount which is reinvested), then I know the date it occurred, I know the amount, I know the current (todays) date, and I know the current (todays) unit price. For that one "parcel" of units I can therefore say something like:
"I bought $100 of units on 20th Oct 2001 at $3.3582 per unit, giving me 29.77 units. Today's date is 20th Oct 2002, current sell price is $3.6591 per unit. Therefore that $100 has increased to $108.96, over exactly 1 year, which is 8.96% return.
Whether that's appropriate or not, I don't know - but I sure can't figure out a way to use this information to calculate some kind of overall return.
The exact same issue would apply to anyone who purchases irregular parcels of shares for the same company.
Anyone able to help me?
Thanks
Kevin.