Annual return on share holding

[LobsangRamper]

I hope this the right forum for my question.

I have share holdings with 2 separate brokers - one automatically reinvests dividends and the other just leaves them as cash. The shares holdings were originally built up from Motley Fool Share Advisor recommendations, but I'm ashamed to say I have just left them unattended for the last few years and have little idea whether they have been a good investment compared to a share index tracker.

I would like to understand better how the shares have actually performed over the years, and I think the way to do this is calculate the Annual Return for each company's shares. I know that this can be done by

((ending_value - beginning_value) ^ (1 / num_of_years)) - 1

but it is complicated by multiple dividends being paid on various dates, some of which will have been automatically reinvested by buying new shares at that time. And some of the dividends will have been left as cash, so I guess there would need to be some sort of adjustment assuming that the cash was left in a savings account at whatever the savings interest rate was.

So it looks quite tricky to do this accurately.

Can anyone advise how to do this - or maybe there is some software that would do this for me ?

Thanks in anticipation.

[Raptor]

Moderator Message:
Not a HY shares and strategy question. financial software would be a more likely candidate to get responses. Raptor.

[paulnumbers]

I use quicken for this. I imagine gnu cash does something similair, or money dance. Or you can use xirr in excel.

[Alaric]

Or you can use xirr in excel.

If you aren't taking out dividends in cash, it doesn't greatly matter whether the Broker reinvests them for you or not. You will need to know the portfolio value from time to time, including cash. That applies whether you use financial software or write your own with Excel.

If the Brokers give you reports at the same time each year, say 31st December or 5th April and you haven't put any money in or taken any money out, then your annual return was just (value now)/(value last year) - 1 expressed as a percentage. So 31st December 2016 it was worth £ 50,000 and 31st December 2017, £ 60,000, you've made 20% over the year.

[tjh290633]

You need to do a cash flow for each share holding.

Cash inflows are negative and outflows positive (or the other way round, it doesn't matter). If the dividends are reinvested, then you have both an outflow and an inflow. These may be identical, but if there is stamp duty or brokerage involved, then the inflow will be smaller, although the total inflow should be the same. The current value is treated as an outflow.

Do an XIRR calculation on the cash flow, using the actual dates for each cash movement. All you need are two columns, one with dates and one with the cash flow. Then use the XIRR formula to work out the return over the holding period. Note that periods of less than a year may give what look like anomalous results.

In the simplest case, if there is only one inflow and no outflows except the current value, you can just apply XIRR to those two values.

TJH

[LobsangRamper]

Thanks all for the tips. I've also found the Lemonfool software page that seems to have some useful tools which I'll take a look at. Will any of them do XIRR for me ?