IRR is the key investment return metric used by most mid to long-term professional investors. However, its accurate calculation, including all interim cash flows and historical currency rates, might be challenging for private investors if done manually in a spreadsheet.
8FIGURES app accurately calculates IRR for each stock and ETF in your portfolio, including historical dividends. Most brokers and stock trackers only show P&L and % return vs cost without historical dividends, underestimating true investment returns as a result.
Those investors who track their stock portfolio in Excel have to manually record every dividend received for every stock with a corresponding payment date. More often than not they end up giving up tracking dividends as it requires too much manual work, resulting in inaccurate investment return data and suboptimal investment decisions, be it upsizing or selling a position.
But why knowing accurate IRR (including dividends) is so important for professional investors, especially those investing middle to long-term?
IRR (Internal Rate of Return) captures not only the absolute return amount but also the timing of all investment cash flows (entry, dividends, and exit). In a simple case with no dividends, IRR mathematically equals CAGR (Compound Annual Growth Rate) which could be calculated as
If a non-dividend stock is up 10% in 6 months, its IRR is 21%, however, if it is up even 50% in 5 years, its IRR is only 8.5%. Knowing IRR allows you to compare stock performance to the interest rate on your bank deposit (APY), the IRR of other investments in your portfolio, a market index, or your target net worth annual growth.
If you have non-USD stocks and ETFs in your portfolio, the 8FIGURES app converts the cost and each dividend to USD at a historical exchange rate. As a result, you get the most accurate calculation of your investment returns (including IRR) in USD even for non-USD positions. Why does it matter? If there are EM stocks in your portfolio, you might have a gain in local currency, however, your USD returns might be even negative due to local currency devaluation and vice versa.
If your broker is not yet covered by our app, you can add your Stock and ETF positions manually by searching the issuer name or ticker – it only takes a few minutes to add your portfolio data manually and enjoy automatic tracking going forward.
Get a professional understanding of stock performance in your portfolio. Download the 8FIGURES app now.
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