Net Present Value = 0 -> real investment performance?

[Polp]

Hello everyone!

I was wondering how my investments and my portfolio have done so far taking into account everything (costs, taxes, dividends, and so on.)

I've been using GnuCash to keep track of everything from the beginning a couple of years ago. So what I can already tell is the total cashflow in and out of my brokerage account, the current balance and the current value of my assets. With that information I know how much money I really made with my investments. That total number has diminished over the last three months, but I am still positive (knocking on wood ).

However, that does not say too much about my overall performance, does it? I have just checked the history and some of my investments are still very positive. For example, one purchase I did a couple of years ago would still equal to an 7% annualized return despite of the latest stock markets drop. Other, more recent investments obviously did much worse.

So I was wondering how exactly would I calculate my real annualized return with all those positive (dividends, sales) and negative (stock purchase, fees) cashflows? As far as I understood the Internal Rate of Return (IRR) does not apply since I have mostly negative cashflows (buying more stocks).

My thought was that I would do a net present value (NPV) calculation:

• list all the the cashflows and the time they appear

• set up the NPV equation for the day of my first investment

• assume that I sell all my holdings today without (without taxes)

• iterate so that a constant discount rate r leads to a NPV equal to 0

The NPV equation is:
NPV = -C0 + C1/(1+r) + C2/(1+r)^2 + ... + Ci/(1+r)^t

Is that the way to go? It looks like a lot of work to set up now but once I have done that all I'd have to do is update the cashflows and current values of my holdings and reiterate to get my current, REAL return on my investments.

How do you handle that? Is there an easier way to do that? There must be some software for that.
Thank you very much in advance.

[just]

I use the XIRR function in my spreadsheet. Try googling XIRR and investments. I guess there's something similar in GnuCash?

[Polp]

Hello just,

thank you for that hint. I tried out the XIRR formula and it seems to work quite well. It is basically what I was looking for. I copied the data from GnuCash into a spreadsheet and calculated it there. I was able to calculate my return since I opened my brokerage account, everything included My version of GnuCash does not have that option but there seemed to be discussions wether or not to implement it. I am also checking wether the latest version has anything new about that.

However, I am now figuring out how to do that more easily to get more information out of my investments. For example things like how did fees affect my return, which fund did the best and how did I really do in comparison with the market. The latter might be really interesting because I am investing in Indexfunds anyway so my real return afters fees vs. the markets would be interesting to know.

I also stumbled onto the difference between XIRR and the TWR (Time Weighted Rate of Return): https://www.investopedia.com/terms/t/ti ... tedror.asp . It might be interesting to compare those two since I am currently in the accumulation phase. The TWR would apply once I don't accumulate anymore.

How do you guys do that? Just, you use a spreadsheet: Do you have one for each investment and one for all the investments or how do you do that exactly?

Thank you very much in advance!