Wednesday, August 26, 2020

What is my Best Investment?

I was just listening to a pod-cast where the host asked the guest (Karsten Jeske) what their best investment was and they could give an answer in annual percentage terms. Up to now, I have tracked returns of individual investments in absolute dollar terms. I can easily say which has been my best and my worst on that basis. The best was the Colonial First State Geared Share Fund and the worst has been the Tribeca Global Resources Fund. But dollar returns depend on the amount invested. I do have average monthly percentage returns for many investments, but properly taking into account transactions is hard. So, I thought that I could compute the internal rate of return. This does take all transactions properly into account. You need to compute each monthly net cashflow into the investment (which I already have in individual spreadsheets I keep on each investment) and then for the current month assume that the investment is sold at the current price. Excel has an IRR function that can be applied to the column of cashflows.

I plan to do this slowly as I have invested in around 200 different things. The first three I did are gold (34% p.a.), China Fund (14% p.a.), and 3i (6% p.a.). 3i was surprising as this is a lot less than the average annualized monthly return of almost 14%, that I previously computed.

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