Hi Conrad
It might help if you opt to either monitor/measure on an accumulation basis or on an income basis. One or the other alone.
If accumulation then all dividends are reinvested and the overall gains will generally be higher.
If income, then you just measure the capital gain of the share price only and 'spend' the income (dividends) - but may keep a record of how much dividends were received.
When adding/reducing holdings over time it might be better to unitise the measure - as though you were running a unit trust or fund.
For AIM, with both 'stock' and 'cash', a better measure is the combined total of the two. Measuring just the return on stock value alone (ROCAR etc.) yields somewhat distorted figures. ROCAR can sometimes look fabulous in isolation, but what matters in practice is the combined stock and cash total value. Combining both stock and cash is also easier to handle when dividends are periodically paid and added to the 'cash' holdings.
An AIM might average 60% stock exposure, 40% cash over a period of time, perhaps having dropped to as low as 40% stock, 60% cash at times during that period, and maybe as high 80% stock, 20% cash at other times (as an example). Whilst the stock ROCAR might appear good, often when you compare to a constant 60-40 (or whatever the average is for the particular AIM), you might not see a great deal of difference between AIM and constant weighted. i.e. ROCAR can be an illusionary measure.
The benefit of AIM is that it will figure that average stock/cash weighting out automatically for you. One AIM over one period of time for instance might average 40% stock, 60% cash, and whilst that might compare to a constant 40-60 held throughout, the constant weighting approach couldn't have known that would have been a good choice until after the event (not known in advance).
Regards. Clive.
