Simple Math Question

[marko]

A quiet day here at the marko household and I'm trying to figure out my 'net, net inflation' investment gain over the past 15 years.
Some of you here know that I'm really bad at math so please be kind.

Can I just take my starting balance from 15 years ago, look up what that amount is in today's money, calculate that amount vs today's balance and divide by 15?

I'm not looking for "3 decimals accuracy".

For example, $100 in 2006 is now about $137. If today's balance is $200, can't I divide (137/200)/15)*100 to get 4.5% average annual net inflation gain?

[finnski1]

Quote:

Originally Posted by marko A quiet day here at the marko household and I'm trying to figure out my 'net, net inflation' investment gain over the past 15 years. Some of you here know that I'm really bad at math so please be kind. Can I just take my starting balance from 15 years ago, look up what that amount is in today's money, calculate that amount vs today's balance and divide by 15? I'm not looking for "3 decimals accuracy". For example, $100 in 2006 is now about $137. If today's balance is $200, can't I divide (137/200)/15)*100 to get 4.5% average annual net inflation gain?

Well with those numbers I get an annual gain of approx 2.52% net of inflation.

[dunkelblau]

Here's what I get (sorry about the formatting)
Excel formula Result Net%/yr
=(200/100)^(1/15) 1.047294123 4.73 nominal
=(200/137)^(1/15) 1.025543206 2.55 inflation adjusted

[finnski1]

Quote:

Originally Posted by dunkelblau Here's what I get (sorry about the formatting) Excel formula Result Net%/yr =(200/100)^(1/15) 1.047294123 4.73 nominal =(200/137)^(1/15) 1.025543206 2.55 inflation adjusted

Yeah. You are more accurate. I looked and I was doing monthly compounding not annually. When I reran it annually I get the exact same numbers as you.

[finnski1]

Quote:

Originally Posted by marko A quiet day here at the marko household and I'm trying to figure out my 'net, net inflation' investment gain over the past 15 years. Some of you here know that I'm really bad at math so please be kind. Can I just take my starting balance from 15 years ago, look up what that amount is in today's money, calculate that amount vs today's balance and divide by 15? I'm not looking for "3 decimals accuracy". For example, $100 in 2006 is now about $137. If today's balance is $200, can't I divide (137/200)/15)*100 to get 4.5% average annual net inflation gain?

If you have access to the google play store on your phone search for financial calculators and find one that says" Financial Calculators" by someone called Bishinews. It is free. It has many easy to use calculators and the one I use all the time is called "TVM" calculator which stands for the Time Value of Money. It is simple to use and you can solve for interest rate, future value etc.
For example to figure out what you were asking I input the following:
Present value (PV) = 137.00
Payments = 0 (your not making any payments)
Future value= -200.00 (the negative sign is important but not obvious)
Annual rate= Rate (this is what you are solving for)
Periods= 15(make sure it says "annually" in the compounding choice directly below or if you were using a monthly compounding you would change this to 180 months)
so now you just hit the green "Rate" box to get your annual rate of return.
You can of course solve for Future value if you knew your annual return etc.

[marko]

Quote:

Originally Posted by finnski1 If you have access to the google play store on your phone search for financial calculators and find one that says" Financial Calculators" by someone called Bishinews. It is free. It has many easy to use calculators and the one I use all the time is called "TVM" calculator which stands for the Time Value of Money. It is simple to use and you can solve for interest rate, future value etc. For example to figure out what you were asking I input the following: Present value (PV) = 137.00 Payments = 0 (your not making any payments) Future value= -200.00 (the negative sign is important but not obvious) Annual rate= Rate (this is what you are solving for) Periods= 15(make sure it says "annually" in the compounding choice directly below or if you were using a monthly compounding you would change this to 180 months) so now you just hit the green "Rate" box to get your annual rate of return. You can of course solve for Future value if you knew your annual return etc.

Thanks! This is helpful.

[racy]

Moneychimp has a calculator: https://tinyurl.com/4zcbxj

[marko]

Quote:

Originally Posted by racy Moneychimp has a calculator: https://tinyurl.com/4zcbxj

Thanks. This is even easier.

The basis of my OP was if I could use an inflation calculator to find my starting balance from 15 years ago in today's dollars, input that number and use that instead of my 'real' starting number.

i.e. instead of using $100 as my actual starting balance, I'd use $132...today's inflation adjusted value.

The result would be my actual, inflation adjusted growth rate.