Basic Formula to Model Future Returns

Discussion in 'Share Investing Strategies, Theories & Education' started by izzy16, 26th Feb, 2017.

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  1. izzy16

    izzy16 Well-Known Member

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    I know we shouldn't base future returns from historical performance, but I'm wondering if there's a way to model future returns based on the following:
    • Initial purchase of shares
    • Re-investment of dividends
    • Dividend growth rate
    • Addition of new shares every month (top-ups)
    I've just been using a basic compound interest calculator based on total portfolio return %, but it doesn't allow me to factor in dividends + the growth rate of dividends either.

    I guess the answer I'm trying to get is: If I invested $x in y fund, based on y's average performance (income + capital appreciation of shares), and the addition of $z funds per month, what would $x become after 5/10/15/20 years?

    Is this possible or way too difficult to model?
     
  2. Ross Forrester

    Ross Forrester Well-Known Member

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    Just do it through excel.

    If the dividends are to be reinvested you increase the growth rate to include dividends.
     
  3. Marg4000

    Marg4000 Well-Known Member

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    Impossible to factor in unknown future events.
    A rough guide at best.
    Marg
     
  4. mrdobalina

    mrdobalina Well-Known Member

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    there's more to life than working
    Cashflow analysis and net present value.
     
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  5. Phase2

    Phase2 Well-Known Member

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    No it's pretty easy to do in excel as others have mentioned. Check back here later today, I'll tidy up an old sheet and post it for you..
     
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  6. izzy16

    izzy16 Well-Known Member

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    Thanks @Phase2 for your help, I'm keen to see it! Love these forums.
     
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  7. Phase2

    Phase2 Well-Known Member

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    Found it..
    I've locked the sheet so you can't accidentally edit the cells with formulae. There's no password protection on it though, so you can unlock it to change /copy and paste.. Just go to "Info" and unprotect the sheet. :)
     

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  8. Nodrog

    Nodrog Well-Known Member

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  9. Intrigued_again

    Intrigued_again Well-Known Member

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    There's an error in that spreadsheet which needs correction the margin loan rate is not calculated from the right cells. I'll sort out when I get a chance.
    What company are you trying calculate that you mention above ?
    Let me know
     
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  10. Intrigued_again

    Intrigued_again Well-Known Member

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    Hopefully, all is correct.
    Use the blue cells to enter your data, purchase prices I used for the day (I think from memory I need to go through it again to check)


    Blue cells Top and Bottom
    Margin Loan LVR: Set to your preference
    Margin Loan Payment: I have not looked at capitalisation as yet (when I work it out)
    Extra investment: what you want to add every year
    Increase PA: if you’re able to increase extra investment increasing yearly
    Invested: First amount to get started
    Options: When we buy shares we use options to purchase this usually add a small % to the capital
    Tax Rate: up to you
    Franking Rate:

    There is also:
    Drip calculator
    DRIP (Dividend Reinvestment Plan) Calculator
     

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