Description Features Primer RoR vs Planning Examples  Quick Start  How To Versions
RORICX, Rate of Return and Retirement Planner Calculator

Documentation pages. Quick Start.

This page is for unpatient ones. Brief scenario to process.

List of Content.

First scenario: bought and sold.

Second scenario: no activity, sleeping account.

Third scenario: retirement planning.

First scenario: bought and sold.

We bought a house on Jan 15 for $100,000 and sold it on Nov 17 for 120,000. The question: what is the RoR?

After logging in we arrive to the main page - portfolio list (Fig.1)

Fig. 1

We are starting from scratch, so there is nothing in the list on Fig.1. So the first step is to create a portfolio by clicking +Add link (Fig.2).

Fig. 2

We arrive to the portfolio Add/Edit page where we create a portfolio named "house" by typing this name in and clicking Insert (Fig.3).

Fig. 3

After clicking insert we are back at Portfolio List page. Now there is one record with the "house" portfolio. This record contains several icons to execute different tasks against this portfolio (Fig.4).

Fig. 4

The tasks we want to do should reflect our investment history. First of all we invested $100,000 when we bought the house. We have to reflect it by recording this transaction. To enter a transaction we should click the transaction icon in the second column. This will lead us to the transaction list for this portfolio (Fig.5).

Fig. 5

This list is empty and we need to enter the first transaction. Naturally to introduce a new transaction one should click on the +Add link (Fig.6).

Fig. 6

This leads us to the Transaction Add page (Fig.7), where we click on the calendar icon (to the right of the transaction date) and enter November 15, 2009 (since it is our purchase date), then on the amount, entering $100,000 (our purchase price) and then on Memo, typing in "purchase".

Fig. 7

Then we click Insert and we are back at the Transaction List that displays our first transaction within our portfolio (Fig.8).

Fig. 8

In a similar way we enter a second transaction that reflects the sale of our investment some ten months later (Fig.9).

Fig. 9

Note that the first transaction has a positive amount and the second one is negative. This is because whenever we credit the investment portfolio we put positive amounts and whenever we debit the portfolio we assign the negative sign to the transaction. So when we take money out of pocket and put them into portfolio the amount is positive and when we take money out of investment and put them into the pocket we assign a negative sign to the investment amount.

After recording purchase and sale transactions we are ready to calculate the RoR. But first we should finish transaction list processing and return to the Portfolio List. To do this we should click the Back to portfolio link and this brings us to the Portfolio List (see Fig.4).

When back to the Portfolio List all we have to do is to click on the RoR icon within our portfolio row on Fig.4. This will lead us to the RoR list for this portfolio (Fig.10).

Fig. 10

Similar to previous cases the RoR list is empty (we had no chance to calculate RoR for this portfolio, it is our first try), so we click +Add link and this leads us to the RoR insert page, where we enter the starting dates for our interval (we use just one day before our first transaction and one day after) and we enter zeros for our starting and ending values to reflect the simple fact that there is nothing in our portfolio before the purchase and after the sale (Fig.11).

Fig. 11

Then we click Insert and Calculate button and we arrive back to the RoR list (Fig.12) with the results of our calculation: RoR, Invested, Growth and Net.

Fig. 12

We see that the Invested amount equals to -20,000, which makes sense since we got back $20,000 more than we had invested. The Growth is naturally 0, since we started with zero and ended with zero and the Capital Net Gain is 20,000. The value for RoR is around 22%, which also makes sense since we invested 100k over 10 months with 20k capital gain.

It is worth mentioning that even in this simple case there may be different approaches. Assume for example that instead of recording the second transaction, we just omit it, simultaneously increasing the end market value to 120000 to compensate for this. This approach (one transaction instead of two with non zero end market value) will lead us to the same results.

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Second scenario: no activity, sleeping account.

Assume we have a sleeping investment - may be a property, or stock portfolio. Assume there were no transactions for a period of time, but the market value naturally changed. The question is the same - what is the RoR?

We have to create a portfolio, lets appropriately call it "no_transactions" (Fig.13)

Fig. 13

Without entering any transactions or programs lets go directly to the RoR Calculation icon in the fourth column and arrive to RoR Calculation List (Fig.14).

Fig. 14

This list is empty, so clicking on the + Add link located above the grid in the right section, above the Edit, will bring us to the RoR Calculation screen. Lets enter two dates a year apart and a start market value of $1000 followed by an end market value of $1050, and request a monthly compounding method (Fig.15).

Fig. 15

Clicking Insert and Calculate will bring us to the list of RoR Calculations with one record calculated (Fig.16).

Fig. 16

The calculated RoR is 4.89% just a tad below the 5% that one may expect. Thats because the Monthly compounding method was requested. Let's click on the Edit icon and change the Compounding Method to Yearly (Fig.17)

Fig. 17

Clicking Update and Calculate will bring us to the list of RoR Calculation with one record calculated (Fig.18) with different RoR value.

Fig. 18

The calculated RoR is 5% exactly as one may expect. Thats because the Yearly compounding method was requested and it is less efficient than Monthly (i.e. to grow the same 50$- one has to apply less rate when compounding monthly).

So this example also shows that as expected the calculated invested value is zero, the growth is 50 and so is the net.

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Third scenario: retirement planning.

Here is the third scenario: assume we have a $700,000 portfolio. Assume for the next five years we will be contributing $800 monthly, and after that we will be withdrawing at a rate of $5,000 per month. Assume that we will invest at a very conservative rate of 5%. The goal is to find out the portfolio value 25 years from now.

As always lets create a portfolio named Retirement (Fig.19)

Fig. 19

According to our scenario we don't need to create any transactions but we will need two programs. Clicking the Program icon in the third column brings us to the empty Program List (Fig.20).

Fig. 20

Clicking on + Add link located above the grid in the right section, above the Edit, will bring us to the Program maintenance screen. Lets name the program saving, lets enter Jan 15, 2010 as a start date and Jan 10, 2015 as an end date, and let's enter the value 3 for the Day and let set the contribution Amount as 800 (Fig.21).

Fig. 21

After clicking Insert we'll arrive to the list of the programs with one record Inserted (Fig.22). Notice how the Start Date was saved as the first day of the month and the end date was saved as the last day of the month.

Fig. 22

Clicking on + Add to introduce a second program, again bringing us to the Program maintenance screen. Lets name the program spending, lets enter Jan 15, 2015 as a start date and leave end date blank (to indicate that it runs forever), and let's enter the value 10 for the Day and let set the contribution Amount as -5000 (the sign will indicate the withdrawals, not contributions) (Fig.23).

Fig. 23

After clicking Insert we'll arrive to the list of the programs with one record Inserted (Fig.24). Notice how the Start Date was saved as the first day of the month. Also notice that on Jan 2015 there will be two transactions, one on Jan 03 for the last credit of 800 and also on Jan 10 for the first debit of -5000.

Fig. 24

After entering both program lets click on the Back to the portfolio link in the right bottom corner which will bring us back in our hierarchy to the list of portfolios (Fig.25)

Fig. 25

Now we ready to execute the retirement planning. On the record with Retirement portfolio (this is a single record right now, but of course in principle you'll have many portfolios in the list) go to the fifth column and click on the Planning Icon and this will bring us to the Projection Calculation Page (Fig.26)

Fig. 26

This list is empty so as usual we have to request a calculation by clicking on + Add, and this will bring us to the Projection maintenance screen. Lets enter the starting date as Jan 10, 2010, end date as Jan 10, 2035 (some 25 years later), lets enter the start value as $700,000 and set the estimated future RoR at 5% and lets further assume the Compounding Method is Twice a year (Fig.27).

Fig. 27

Now click Insert and Calculate which will do the trick and bring us to the Projection List screen with our calculated record displayed (Fig.28).

Fig. 28

From this list we can see that the Calculated End Value is around 496,000. We can also see that Invested value is -1,157,000. This matches our estimates: for first five years we had invested 800*12*5=48,000, and for the following twenty we withdrew 5,000*12*20=1,200,000, which gives a total of -1,152,000. This total is actually $5000 short of the calculated value. The reason is quite simple, we "forgot" the last transaction on Jan 10 2035. At the same token, for the saving program the first transaction actually happens on Feb. 03, 2010 (the projection interval starts on Jan 10, 2010, after the regular contribution on Jan 03, 2010).

Another thing that is important to mention is that the Net is around $950,000. Recall that the Growth is the sum of Invested and Net. I.e. the Net part reflects the market growth. We can very roughly estimate that in our case the average value of our portfolio was around $600,000 (it started with $700,000 then for five years it grew and then it started to shrink and after 25 years we ended at $500,000). Assume the average as $600,000, then 5% RoR was bringing us 600,000*0.05=30,000 yearly and within 25 years the very rough estimate of Net would be $750,000 (30,000*25). The real calculation shows that in fact it is a bit more, yielding to $950,000.

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