On Wed, 21 Jun 2000, Rob Walker wrote:
> >>>>> On Wed, 21 Jun 2000 01:09:02 -0500 (CDT), Dave Dribin
> >>>>> <[EMAIL PROTECTED]> said:
>
> Dave> I've just downloaded GnuCash 1.4.0, and I'm very impressed! I
> Dave> am very interested in tracking my mutual fund and stock
> Dave> performance in GnuCash. I would like to be able to calculate my
> Dave> return on investment (ROI) of my mutual funds.
>
> When/if this feature makes it into gnucash, I would like to see an
> example of what you are talking about. It seems like a good thing to
> compute, but I have no idea what you are talking about. :-)
In order to get an accurate measurement on your portfolio, you should
calculate the annualized return rate, not your total return rate.
Knowing your annualized return rate, you know how well your investment
is performing. Here's a good article describing what the annualized
return rate is and why it's more important than total return:
http://www.fool.com/Workshop/1998/Workshop980804.htm
The article mentions the Internal Rate of Return (IRR) which is the
function that calculates your annualized return. The XIRR Excel (and
Gnumeric) function mentioned in the article calculates the IRR for
you. If GnuCash could calculate your annualized return (using the IRR
function), then there's no need for a spreadsheet. :)
BTW, the IRR is a fairly complex mathematical equation to calculate.
A couple nice links on the math of IRR are at:
http://invest-faq.com/vse/analy-int-rate-return.html
http://bubba.uta.edu/~diltz/5311l05.htm
Since IRR the root of the net present value (NPV) function, and NPV is
a non-linear, single variable function, you need to approximate IIR
using numerical methods as such:
http://www.cyberus.ca/~toe-jam/roots/roots.shtml
Also, fool.com has a couple other good articles worth reading, if
you've got the time:
http://www.fool.com/workshop/2000/workshop000302.htm
http://www.fool.com/workshop/2000/workshop000330.htm
Ok, that was probably *way* more info than you wanted, but I hope it
helps. :)
-Dave
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