WTA, i had a heated argument with my GF regarding the calculations of ROI%.

Eg: How do u get the ROI, if my initial sum was RM20000 and within 9months, the DY i received was RM1916.69.

is it (1916.69/20000)*100*9/12 ?

wah why must argue over ROI%? hehe

So far within 9 months, the ROI % is 1916/20000*100.

Not really sure why the 9/12 is added. Trying to use a average return over 9 months over the course of 1 year? Maybe I need a lesson in this as well.

I use pro-rate to count.
Cause we don't know what will the DY be in the next 3 months.
So i use 9/12 to get the ROI up till this month only.
Is this a correct way for calculation our ROI?
Or it's base on annual assumptions?

Uhmmm even if 12 months is up and revenue doesn't come up, your ROI will still be the same because you aren't calculating growth which measures time.

The formula you state would mean that if 12 months is up and you don't make anymore money, the ROI would actually increase. Because of the 9/12 added, your 9 months ROI would be lesser than your 12 month ROI even if the return did not change. So definitely is not right.

But if you are calculating the growth of your wealth over time to compare with the compounded interest of FD for example, then you have to set a timeline and your returns at the end of the timeline to calculate your growth from the initial investment to the final sum. This will show how you'd compared against the compounded interest of the FD over the stated timeline.

ROI is just return on investments. ROI % = (final sum - investments) / investments * 100%

Time is not included in ROI calculations.


If you used your calculation,

For 9 months;

1916/20000 * 100% * 9/12 = ROI of 7.185%

For 12 months (no extra dividend given);

1916/20000 * 100% * 12/12 = ROI of 9.58% <<--- This doesn't make sense as how can the ROI increase when your total sum did not?


So I think there is a mistake with the formula given, as I don't think time is a factor for ROI% calculations. Only use time if you are measuring growth over a certain period.



Edit:
I think your calculation can be used to calculate FD interest returns because the interests are fixed on annual basis but you can collect the pro-rated 'returns' every quarter (3 monthly).

Example;

FD is 3% for 1 year.

So for 20000 investment,

20000 * (3/100) * (12/12) = 600 if you hold it for 1 year.

After 6 months from initial investment;

20000 * (3/100) * (6/12) = 300 if you hold it for 6 months

After 9 months;

20000 * (3/100) * (9/12) = 450 if you hold it for 9 months

Since the FD is fixed and can't grow above the stipulated 3% interest and it's based on a 12 month time-line, you can calculate your pro-rated returns. I think this would be a more appropriate scenario where you can use your formula.

This post has been edited by skiddtrader: Mar 14 2009, 05:49 AM

Think it should be (1916.69/20000)*100*12/9.
But you have to take into consideration of fair value change if you really want a accurate one.
Just my 2 cent.

Yup 12/9 should be the annualised rate. More precise should be ROI p.a.

But actual non-annualised ROI is without 12/9 figure. This figure is the actual gain, annualised means nothing although it is still correct, it can mean nothing or meaningless as below example.

Just like I buy today and sell off those gaining shares tomorrow, example my initial capital is 5,000 then I sell off with gain at 5,050, gaining 50 or 1% out of it. Annualised it it become 1% x 365/1, my annualised ROI is 365%! sound a lot and great, but in actual fact, it is little (50 only) or gaining 1% only.

If I am a fund manager, I can come out with 365% annualised return rate to impress people. This tactic is quite norm nowadays which has happened in some insurance saving plan lately that put high rate to attract people. No offence. They are correct figure as well.

But do remember, annualised rate doesn't mean much in term of decision making or justification for investment especially those figure get from shorter duration, it can somehow misleading or precisely give us the wrong idea/perception.

So it is just an academic term, what we want is always real figure that reflect better or more accurate situation.
Figure is up to human being plays it around, it depends on creativity of individual. Always dig more into it instead just purely looking at headline figure.

My 2 cents.

Ok...got it..thank you all alot...cheers~

Cheeroy, I'm confused now. Normally if the intention is to annualised an income, the timeline must be set first right? Is it even right to use the 12/9 or 365/1 figure to calculate annualised income?

Using the 12/9 figure with a % calculation is wrong in my opinion. Simply because the figures that comes out doesn't make sense. I'm just wondering if there is any article/research paper/ report that uses it? Or an even an example of how it is suppose to be use correctly.


Edit:

I think I got it already why the 365/1 is used. Mainly to put an estimate on how much at the end of the term would the fund be if the current return is continued consistently. Since it's estimating an expected income at the end of the period based on current data, it will be flawed if it was calculated very early in the set timeline. Accuracy would improve if it is calculated nearer to the end of time line. I myself use it to estimate yearly earnings based on 1 quarter performance sometimes.

So it's used to calculate 'Expected ROI' and not 'ROI'.

This post has been edited by skiddtrader: Mar 15 2009, 12:10 AM

Skid,

It is just academic only, all figure and calculation are correct, just how one interpret it and want to use the number.

In actual fact, annualised ROI, real ROI or whatever is just a figure, you gain is still the same. Don't need to dig more into it, it is just paperwork stuff.

Comparison is always the real and actual gain one is getting.

Cheers.

is there any website that explain about the div. for shares? Wants to know how does it calculated.

may b u can point out a share u'll like to know & i'll give u an example?

hm let say GENTING or RESORT? Normally how do we know when they are give out div? From the corporate website?

thanks in advance

Company normal give dividend after half year and full year of their financial result, which varied from company to company.
To know, you can check their website or KLSE website which there are compiled information of all listed company.

GENTING & RESORTS give out div semi-annually by tradition.... u can always check from the KLSE website for the news as mentioned by Cherroy
And fyi GENTING had proposed a final div of RM0.04 each share for FY08

ok, found it on genting website. Both genting and resorts are giving the same dividen of 4.0 sen

So, lets say if i buy resorts share today, 10x100 @ Rm1.90, how much div will i get?

It also says that the date of payment will be decided later, so i need to hold the shares after the date of payment to get the dividen?

Dividend has nothing to do with your price purchased.

If it said 4 cents then it is 4 cents per share. If you have 1,000 shares x 0.04 = 40

You hold after the ex-date, then you will entitle d the dividend.

u need to hold until the ex-date... the payment date is after the ex-date where the div will be deposited into all the shareholders' CDS accounts.....

Is the 4 sen dividend after or before tax? How do I redraw the dividend money from my CDS account after the dividends are deposited into it?

As far as I know cash dividends are paid by cheque to your name delivered to your address.

Only share dividends are credited to your CDS account. Cash dividends are by cheque in your name.

3 cent is wat u'll get after 25% tax..... Is ur account a nominee or a direct acc? if direct acc, u'll get the cheque itself; nominee acc, i'm not too sure