Tuesday, January 21, 2014

Share investment calculate CAGR

10% stop loss looks like trading. For Shares we need to have the power of compounding and we should not be tempted to sell in every dip.
But we should still have stop loss. A 15% CAGR stop loss, after a wait of 2 years looks ideal.
All portfolio tracker gives absolute return also many doesn’t take into account the dividends.
We can use XIRR to accurately calculate the CAGR. Invested amount should be entered as a negative number, dividends as positive  and if you want to know the CAGR for today then enter today’s price as the last entry!
With respect to share market, XIRR will not take into account bonus and split, but if we can factor it accordingly by looking at the invested amount and not the number of shares. Then it will be easy.
XIRR is very effective to calculate CAGR especially in shares where the investment date, dividend date and exit date will never be periodic.

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