Thursday, July 21, 2016

Money-Weighted Reporting

According to an article by Rudy Luukko on Morningstar Canada fund companies are going to have to start reporting clients returns on a Money-Weighted basis. For a definition you can go to Investopedia

If anyone is familiar with Excel this is how returns are calculated using XIRR. For anyone wanting a long explanation you can go to a blogger called The Calculating Investor.

By the way, my spreadsheet uses both IRR and XIRR to do calculations. IRR stands for internal rate of return. It basically gives you the compounded rate of return over a period of time. The difference between IRR and XIRR is that XIRR uses dates whereby the IRR assumes you are doing calculations based on full years. So if you have a beginning amount and an ending about with 4 spaces between with 0, then you are talking about total rate of return over 5 years.

For example, on Alaris spreadsheet I put out yesterday, I get the stock's price Internal Rate of Return of 15.09% per year with 6 cells of -$11.64, $0.00, $0.00, $0.00, $0.00, $23.50. If you add in dividends the IRR is 17.91 with 6 cells of -$11.64, $1.04, $1.17, $1.35, $1.47, $25.06. Note that the last cell includes price plus dividend. There are lots of blogs that explain excel spreadsheet functions. See this support one from Microsoft.

On my other blog I wrote yesterday Alaris Royalty Corp (TSX-AD, OTC-ALARF)... learn more. Tomorrow, I will write about Lassonde Industries Inc. (TSX-LAS.A, OTC- LSDAF)... learn more on Friday, July 22, 2016 around 5 pm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.

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