Ted's Blog

I keep a spreadsheet of my investments and one of my favorite things the spreadsheet does is track not just the average cost of the investments, but overall how much it is worth over the net amount of money spent on the investment (accounting for dividends and so forth). It also tracks reportable gains or losses using average cost or by identifying shares sold. As I held onto investments for longer periods of time, I wanted to get an average annual return, so I came up with a formula based on the date I first buy shares in something to set a timeline up to now. And it uses exponents correctly so it doesn't just say that if you have a 50% gain over 5 years that you have a 10% annual return (it would really be more like 8.4% annually with compounding). The flip side of that is if I buy something and it goes up even a small amount after the first day (a tiny fraction of a year), it shows a ridiculous annual percentage increase. Now, I don't like to brag about stock picks because I am losing money on the year, but I did buy some Bank of America one week ago (not enough to make a difference since most of my money stays in mutual funds). I bought at $6.50 a share and soon it was down as low at $6.01 a share. But then Warren Buffet made a play and it went up over 20% during one day (less than that by the end of the day). And my spreadsheet showed some ridiculous percentage increase. But it has kept going up for a couple of days. Usually by a week, the percent gain drops to something reasonable, but right now my investment (on paper) is up 28% in a week. In fact the percentage is so high that Excel just showed #######, meaning the number is too large to fit in the square (as an investor this is something that makes you feel pretty good, like on the Dukes of Hazzard when Boss Hogg was calculating how much some scam of his would make on his calculator. Once he pressed the equals button he hollered for delight. Roscoe asked him "How much will we make?" And he said with great glee: "This calculator don't go that high!"). It turns out that if you take into account compounding, 28% in a week gives me an equivalent annual return of 34,753,785% which would make me a millionaire by the end of the year (really in almost exactly 28 weeks). Actually I won't last nearly that long because I put in a sell order when it goes up by 50% (I usually do 20%, so this is almost certain to backfire).