Expert: Dr. Joseph de Beauchamp - 4/22/2006

Question
 For the past 6 months I've been investing using a technical analysis method.  During this time period I put an initial amount into a trading account and have been buying/selling as the method indicates.  

I am trying to figure out my return over this time period and am having trouble.  I am trying to do a timeline on paper in order to understand how to relate the variables of PV, FV, IRR, and time, and would like to use excel to figure out my returns.  Since I did not buy/sell every week, month, or any regular time period, or invest all my money at once, I am greatly confused as to how to figure out my real investment return.

Answer
Eddie,

You could work out each block of money on excel spreadsheet, and for each time. I would use i% for PV to FV for this. If you were working out each cash flow, and you have all the times down on this, you could do a IRR. Mostly, people do the money in and then out over a period of time. Certainly, you could look at what you started, and then what was the result, over the period of time; then calculate the average TVM going between the PV or starting to the FV or finish.


For example, you might start with 100k over 10 years, and wind up with 200k in this period. This would be a 7.2% over this period of time using the rule of 72. Therefore the average rate of compounded rate of return would be 7.2%. Any illustration of this would have to be stamped that this is not necessarily an indication of the future returns.

Dr. deBeauchamp