It’s time to Reflect on how to determine the Yield on my SPY Demo investment.
This Spy Demo is an unfudged Demo execution only trades advised by Vortex.
I have been running a SPY Portfolio for exactly 2 years from 03-1-2011 to 02-1-2013 and calculated the Yield in 4 different ways:
1 Simple ROI
Using $ 20000 starting Capital as the Investment Base + 2% Interest on the Reserve and Trading Cost deducted from Reserve.
Dividend is also added to the Reserve.
This is the Black Box Investment Methos with the $ 20000 going in and the Profit coming.
Profit = $ 3.137,75
ROI = $3.137,75/20000/2*100 = 7,84 % /yr
Buy & Hold Yield = 7,41 %/yr
2 ROI on Time Averaged Capital Injections
If however one considers all the money that has been added to the Reserve like the Interest and the Dividend and when that is Averaged over time for the 2 years in SPY that comes out as a Time Average Investment of $ 20674 and then the Yield looks like this:
Profit = $ 2.464,02
ROTAC = $ 2.464,02/20674/2*100 = 5,77 % /yr
3 Return on Capital at Risk
Average Capital at Risk = $ 7132
In this calculation I look only at the actual investments for equity acquisition (including trading costs). The question now is: "How does one calculate the Profit?
Dividend is not a profit on equity. . .(as dividend is paid the share price goes down;
Interest received is not earned on the equity;
In this case the SPY Profit = $2.258,00
ROTAI = $2.258/7132/2 = 15,84 % /yr
This an Actual Rate of Return On Equity. . . otherwise called IRR.
In this case the Dividend and the Interest earnings would be part of the bank account earnings that have nothing to do with the Equity Gain.
4 The Inflated Return on Investment. . .IRI
If one considers that the interest earnings on the Reserve and the dividend should be included in the profit then:
ROTAI Yield = 22%/yr
This is however a grossly inflated yield representation.
*************
I also run a SPY Demo that I started on 19 March 2012 using a optimization period from 19 March to approximately Mid August.
After that only trades Predicted by Vortex were executed.
Simple ROI = 14,72 %
AI
