Re: ROI (btw) always annualizing

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Posted by Mark on January 10, 2007 at 13:08:38:

In Reply to: Re: ROI (btw) always annualizing posted by Corey on January 10, 2007 at 12:56:00:

: Yes - the stock was puchased last December, and the custom report was for the calendar year.

: Maybe I misunderstood the Roi (btw) function and the option to annualize yields.

: If I create a custom report for a period of 1 year, it sounds like you are saying the Roi (btw) will always annualize investments held less than a year because it is calculating the Roi between the start and end date (which is 1 year).

: I was under the impression that if you uncheck the annualize option, then the Roi (btw) will give the un-annualized yield, even though my custom report is for 1 year.

: Maybe I'm using the wrong field.

: If I want to know what were my top performing investments in 2006, and how well they did (as measured by return on investment), what field should I use?

: If I use Roi (btw) that would skew all my recent purchases (and sales) because it would annualize the returns. If I use Roi (end), that does not show me how the investment did in 2006 because that would show me the return for the life of the investment.

: Does that make sense? Any help would be appreciated.

Hi Corey,

: I was under the impression that if you uncheck the annualize option, then the Roi (btw) will give the un-annualized yield, even though my custom report is for 1 year.

This is not true. The ROI (btw) will always have a yield term equal to the date range of the report. The annualize options control whether yields with a yield term of less than or greater than 1 year are annualized. They do not adjust the yield term itself. The yield term is defined by the definition of each yield field. For example, the ROI (btw) has a yield term equal to the report date range. The ROI (end) has a yield term equal to the time from the first investment, up through the ending date of the report.

: If I want to know what were my top performing investments in 2006, and how well they did (as measured by return on investment), what field should I use?

: If I use Roi (btw) that would skew all my recent purchases (and sales) because it would annualize the returns. If I use Roi (end), that does not show me how the investment did in 2006 because that would show me the return for the life of the investment.

It sounds like you are trying to compare some investments that you only owned for 1 month, with others that you've owned for more than 1 year. If you use the ROI (btw) for a 1 year report date range, this is looking at the performance for the year. For investments that you owned less than 1 year, the performance is extrapolated as if you owned them for the whole year. If you don't want this, you can turn off the option "Options / Yield Interpolation... / Allow interpolation prior to earliest data". In this case, the investments that you only owned in December will report this yield as NA, since you didn't own it on 1/1/06.

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

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