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Showing posts from January, 2017

Sequel to CAGR, XIRR simplified

A sequel to my previous post . Can I make use of XIRR's value to help in my investment portfolio goal setting? Think come, think go... cannot leh. :( WHY? Because XIRR % is like a report card grade which shows how my portfolio has performed over a fixed period of time, say last year. However, it is not practical to set a goal based on the % or confer a meaning to it as the current market value of my portfolio is controlled by Mr Market (although you may argue investment timing matters *cough cough*). So on sunny days, XIRR is good and on rainy days, XIRR is bad. Notwithstanding the fact that data punching is going to be tedious for the value to be accurate. Diligence... hmm... Before I put XIRR completely out of picture... XIRR calculation might be meaningful IF you want to compare some 'investment products' like structured deposit, RSP, Investment-linked insurance or unit trust to see how well their returns fair against stock, ETF or simply inflation within

CAGR, XIRR simplified

Inspired by SMOL's post , I decided to do some reading and a short post on these "cheem cheem" terms that previously I do not use. CAGR stands for Compound Annual Growth Rate. It is useful in measuring (in %) how much an investment has increased in value over a fixed period of time. Watch the illustration in this video here - http://www.investopedia.com/calculator/cagr.aspx  So if your investment grew from $1000 to $1500 over a period of 3 years, the CAGR is 14.5%. Which means the amount increased by 14.5% on its compounded value each year, as follow Year 1: $1000 +14.5% Year 2: Year 1 compounded $$ + 14.5% Year 3: Year 2 compounded $$ + 14.5% = $1500 This is provided no fresh fund is injected into the investment (the investment compounds itself) over the three years. So if investment A returns 14.5% and investment B returns 10%, obviously investment A is doing better and probably worth investing more money in going forward. The problem is... we do not compo