Description combined investments calculator
Tuesday, 04 December 2007 10:52

With this calculator one can compute the effective yield of combined investments with different yields and costs. The calculator also takes yearly deposits and/or withdrawals into account. In addition the calculator computes the total value of each investment category and the combined total at each year. These totals are plotted in two diagrams.

Suppose that you have invested \$ 1000 in equities with an average capital gain of 10% per year. In addition your savings account is worth \$ 2000 and its interest is 5%. Yearly you wire \$ 1000 to your brokerage account and \$ 1000 to your savings account. On the cost side your broker charges 0.1% of your total balance and your bank charges 2% on the amount you withdraw from your savings account. The question is then what the net value increase is of the combination of these two investments. In addition you would like to know what the total amount of your investments is after 10 years and it real value taking 3% inflation into account. For the total it is important to realize that the wires start at the beginning of the second year and continue up to and including the tenth year. So there will be 9 wires.

In terms of input for this calculator we have two investment categories with two different yields: a savings category with a yield of 5% and an equities category with a yield of 10%. First enter the number of years (10), the inflation percentage (3), and then make sure only the check boxes for the first two categories are checked. Then, for each of these two investment categories, enter the yield (10 % and 5 %), the initial amount (1000 and 2000), the yearly amount (1000 and 1000), the yearly costs (both \$ 0 and then 0.1% and 0%), the begin costs (both \$ 0), and the end costs (both \$0 and also 0 % and 2 %). Finally click Compute. Apart from the total amount, the total amount corrected for inflation will be computed as well. The effective yield will be computed.

Two diagrams will be displayed: the total accumulated value in all categories together, and the total value per category. The first diagram also contains a line giving the total value corrected for inflation.

The tabel below shows (again) a description of the input and output fields of the calculator. In addition there are two examples with this calculator:

Field nameDescription
Number of yearsNumber of years for the computation of the yield and the total amount and the total amount per category.
InflationInflation percentage. This is used for correcting the total amount for each year for inflation.
Category in useOnly the checked categories participate in the computation.
Annual value increaseExpected yearly value increase for each investment category.
Initial amountDeposit at the beginning of the first year. A negative amount refers to a loan.
Yearly amountAnnual deposit first applied at the beginning of the second year. This does not include any interest, or other returns. A negative sign implicates a withdrawal. The number of yearly deposits is one less than the number of years in the computation.
Indexation yearly amount (%)Increase/decrease percentage of the Yearly Amount. This percentage is first applied in the third year.
Yearly Costs (\$)Annual costs in each category. These costs will be applied at the end of each year starting with the first year. In the last year these costs will not be applied. Instead the End Costs will be applied in the last year.
Indexation yearly costs (%)Indexation annual costs in each category. The annual costs in the fields above will increase with the percentages specified here.
Yearly Costs (%)Yearly costs as a percentage of the total value of each investment category. These costs will be applied at the end of each year starting with the first year. In the last year these costs will not be applied. Instead the End Costs percentage will be applied in the last year.
Initial costs(\$)Costs that are applied before the first year.
End costs (\$)Costs that are applied at the end of the computation.
End costs (%)Percentage of the amount at the beginning of the last year that will be subtracted from the amount per category as costs.
End amountsOutput field. Computed capital in each category after the specified number of years.
Total end amount.The combined end amount of all checked categories together.
Total end amount corrected for inflation.The real (present) value of the combined end amount of all checked categories together. So this is today's buying power of the total end amount.
Effective annualized ROI of interest rate (%)Effective yield of all categories together with all costs taken into account. This is not some kind of average but the solution of a non-linear mathematical equation. Usually a very accurate solution can be found. Situations in which sometimes no (good) solution can be found are: when the costs are high compared to the yield and the deposits OR when the sign of the value in the categories is both positive and negative.
Total capital plotted against time in years.The blue line is the total capital and the red line is the total capital corrected for inflation.
Value of each category plotted against time in years.This diagram shows for each category a separate line with a different color. The legend is on the left.