Actuarial Outpost How to calculate annual return
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#1
11-01-2019, 02:12 PM
 General Apathy Revered CAS AAA Join Date: Jun 2006 Location: St. Kitts Studying for the Beach Favorite beer: Carib Posts: 33,620
How to calculate annual return

Lets say you have \$100 in stocks. You are contributing \$10 an month. After a year you realized gains of \$50 excluding contributions.

Do you compare the \$50 to the average over the year of (depending how you calculate it) say \$150?
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#2
11-01-2019, 02:15 PM
 fdsafdsa Member SOA Join Date: Mar 2018 Posts: 3,549

You actuary it up bro:

100 x (1+i) + 10 X (1+i)^(11/12)+... = 150

Solve for i

ETA, = 100 + 120 + 50
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#3
11-01-2019, 02:17 PM
 George Frankly Member SOA AAA Join Date: Aug 2011 Location: CO Favorite beer: Sam Smith Oatmeal Posts: 11,228

Quote:
 Originally Posted by fdsafdsa You actuary it up bro: 100 x (1+i) + 10 X (1+i)^(11/12)+... = 150 Solve for i
This. Computers make is pretty easy.

If you want a tractable approximation, the modified Dietz method is typically reliable and accurate.
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 Originally Posted by NerdAlert Butt-chugging seems like the best solution.