How I plan to calculate Returns of my Portfolio:
I have high churn in my portfolio (Separate core & Momentum). Based on Sectoral tailwinds, I rotate sectors, and I also switch between stocks of the same type based on Corp governance issue, or Expected earnings.
Ex: I switched from Som Distelleries to Sula Vineyards since there was short term downtrend due to uncertainity of IT raid.
Hence I am difficulty calculating my Portfolio returns, performance as compared to Nifty, CAGR etc. Also I have two brokers separate, for momentum + Core PF, that makes even more difficult to get feedback how I am doing in markets.
I plan to just take the “Realized Profits” & “Unrealized profits” separately and divide it by the Average Capital I kept in my brokerage account over a tax year? This will give me two data points on an yearly basis.
For the first year:
Average capital: 10 Lakhs
Realized Annual Rate of Return: (1 Lakh / 10 Lakhs) * 100% = 10%
Unrealized Annual Rate of Return: (2 Lakhs / 10 Lakhs) * 100% = 20%
For the second year:
Average capital: 15 Lakhs
Realized Annual Rate of Return: (2 Lakhs / 15 Lakhs) * 100% ≈ 13.33%
Unrealized Annual Rate of Return: (2 Lakhs / 15 Lakhs) * 100% ≈ 13.33%
Calculate Total return percentage
(Realized Profit + Unrealized Profit) / Average Capital
6L / ((10+15)/2) -> 48%
CAGR
CAGR = ((Final Value / Initial Value) ^ (1 / Number of Years)) - 1
(1 + 0.48) ^ (1 / 2) - 1 ≈ 22.47%.
How does this sound? Any alternatives @Mudit.Kushalvardhan
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