Is7550, thanks for responding on ROCAR,
[Offtopic discussion actually]
Possibly you might have misunderstood my intention for retrieving the ROCAR formula. In your example I could use an approximation with(11+8,4)/2= 9,7 % yield. . .I presume CAGR means “Capital Growth” as a percentage. Normally one should not add up percentages in this way as I did here, unless the base quantities have the same characteristics. What appealed to me in the ROCAR is that the average investment over time after a series of buys and sells is usually quite different than the initial investment, and quite different that an arithmetic average.
The "real" return on a time variable investment is what interest me but as a percentage this is difficult to t give a meaningful answer. . . even if this answer is mathematically quite correct(the answer depends on the definition of the yield as a percentage).
For a dynamic investment technique. . . especially for Vortex, which it is intended for aggressive investing. . . the invested amount of money varies wildly. Moreover, if for a high yield investment a significant portion of the equity is sold the average investment over time can be negative and that gives me a negative profit percentage even though the profit in terms of money value is positive. This is a consequence of my choice to use a ROI based on a time averaged investment(ROTAI). The formula I use for ROTAI is similar to the Internal Rate of Return, but possibly not the same. However for as far as I understand with the IRR the yield should also become negative if the investment is sold in a stepwise fashion.
This causes confusion for an investor that does not understand the basis of the percentage yield definition I Use. For the ROCAR the yield was somehow kept positive and I was trying to find out how Tom did that.
Your little program for CAGRL. . . I can not find any NOTEPAD on my computer. . .maybe it is in MS Office but I gave the CD to my son and now it is gone! From the text it is not quite clear to me what it calculates. . .what happens if the investment is sold in stepwise fashion all the way to Equity=0
What I seek is a formula that gives a good representation of the actual percentage yield of the time varying investment when the investment is reduced in steps all the way to zero. ROTAI does that but it end up with a negative yield percentage. I can correct for the negative answer in ROTAI, but I look for other means of solving this problem that maybe are simpler, or more meaningful. Is CAGR the answer? Is this the same or comparable to the IRR?
In my ROTAI formula I could add a simple control element to make the Time Averaged Investment positive: IF TAI<0 THEN TAI=>0. . .This solves the problem I have. And IF TAI=0 then I give an explanation as to why. . . . the original investment has been fully recuperated! . . .(in this case ROTAI = PROFIT/0).
AI
