The Acid Test of your Stock Portfolio

Can your stock portfolio pass this Acid Test?

“Do you advice on stocks?” This was Deepesh on the line.

“No Deepesh, not my forte. For me, it is simple. There are some really good fund managers out there who can do a better job. I rather let them manage my money.”

“Oh OK. You see, I am already doing a good job with my portfolio. I just need a second view on my current holdings.” Deepesh didn’t sound impressed with what I had told him.

“That’s great Deepesh. You are from very few people who have claimed that they have made money by investing in stocks. Let’s do a little thing, if you will.”

“Tell me.”

“Have you ever calculated how much money you have actually made on your stock investments – return on the investment?”

“Not really. But as I said I have made a decent money. I guess it should be close to 15% year on year.”

“Wow! That’s a great number. But let’s confirm it. Can you share your stock portfolio transaction details with me? I will do the maths for you.” I told Deepesh.

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XIRR: How to calculate returns on your portfolio?

XIRR - investment return

It was a lazy Sunday morning. While I was sitting on the window ledge, sipping my morning cuppa tea, the door bell rang. I took the last sip and opened the door.

“Good Morning”, I saw Shekhar standing out wearing a broad smile.

“Good Morning Shekhar, long time!” I was seeing him after several days though he lived just next doors. We were good friends.

“Yes Vipin. Long time! And as always I have come to trouble you a bit.”

“Sure, tell me.”

“You know, I have invested in mutual funds. It’s been a few years now. But I have never been able to understand what is my return on these investments.

This time I happened to open my account statement. And that also doesn’t seem to show it. Can you tell me what’s the best way to calculate it?”

“Sure, why not?”

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