Make your own Compound Interest Calculator, Real and Nominal rates of return on Excel.
HTML-код
- Опубликовано: 6 июл 2024
- Make your own Compound Interest Calculator, Real and Nominal rates of return on Excel.
If you're looking to work with a Financial Planner for financial advice and determine if we would be a good fit for you, contact us today:
Website:
featherstonepartners.co.uk/
LinkedIn:
/ edmund-bailey-chartere...
Spreadsheet used in demonstration added to Dropbox below (for reference only):
www.dropbox.com/t/8DJnxBR14VE...
Please note:
The information provided is based on the current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on my understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances.
This channel is for information and education purposes only. Any information or guidance given does not act as financial advice. Please consult a financial adviser if you are unsure in anyway.
Keep in mind that the value of your investments can go down as well as up, so you could get back less than you invest.
#pension #retirementplanning #financialplanninguk
Thanks for watching. Nice simple compounding calculator that I hope you find useful.
Template shown in video: www.dropbox.com/t/8DJnxBR14VEsp7LF
It’s good to have your own one saved that you can come back to and adjust and adapt accordingly. Let me know in the comments whether your preference is for Real or Nominal rates of return? All the best. Ed
@@EdmundBaileyUK Much prefer to use real rates of return, as it is a truer reflection on the real power of your money once investment growth is taken into account.
Had no idea however how you calculated real rates of return until I saw your video. Very informative and empowering.
Many thanks Edmund and this all helps to forecast just how one's money can grow but more importantly the effects of inflation which is so easy to underestimate. Much appreciated.
Thanks!🙏
Excellent video
Excellent information yet again Edmund - thank you.
Thanks so much. 👍
Very good again, thanks, non of the flashy nonsense some people pump out. You deserve way more than 15k subs
Thanks so much, that's very kind to say. I very much appreciate that.
Awesome video 😊😊
Thanks! 🙏
@@EdmundBaileyUK your welcome
Thanks for another great video on building Excel modelling tools. Can I make a suggestion for another one .... I would love to be able to calculate the return I'm getting from my investments taking contributions into account. This would then let me compare with benchmarks to see how well my portfolio is doing.
Thanks so much. Are you referencing the difference between time weighted and money weighted returns?
column E from 8 mins has contributions. its already in there
how about weekly or monthly contributions chart , the intersest will compound differently wont it ?
Thank you - these videos are excellent!
I’m in my late 40s and am deep in retirement planning. Have paid in to company and personal pensions and investments throughout my working career, and am now trying to work out when I can realistically retire. The dream is to retire at 57 - ie. when I can access my SIPP under current rules - and your videos are making me realise this could be a realistic goal.
How so? I appreciate how you take the “mystery” out of financial forecasting. Valued in particular the cashflow modelling video.
So, thank you very much - it is much appreciated.
Could I also ask a dumb question - how do you work what your annual return on an investment is when you are also making regular contributions to that investment?
The formulas you see on the Internet don’t take into account contributions when calculating RoI.
Thanks so much for the kind comments, great to read that you are fully engaged with your retirement planning. In the models the contributions are increasing in the subsequent year by the investment return. Or I might not be understanding the question sorry,
@@EdmundBaileyUK Hi
Thanks for your reply - my fault entirely in not explaining myself properly!
I’m probably jumping-the-gun (hence, the confusion) by trying to understand how you work out an annual return-on-investment (RoI) on any investment.
Let me try to explain using an example.
If I invest £5000 in a share on 1st January and I do nothing more to that share (ie. make no more contributions) and the value of that share is £5250 by the end of the year on 31st December, then my understanding is that would be a return on investment of 5% - ie. (£5250-£5000)/£5000.
However, if I invest £5000 in a share on 1st January, contribute £100 per month into that share and, to keep the maths simple, the share also appreciates by 5% over that 12 month period, I’d end up with £6510 on 31 December - ie. ((£5000+(£100*12))*(1+5%).
However, (£6510-£5000)/£5000 = 30.2%
In my mind, it would be misleading to claim that my RoI in this instance is 30.2% - because much of the final amount (£6510) is made up of additional capital contributions rather than investment growth.
Or is my logic muddled?
Any help or insight you can give would be greatly appreciated.
@@chrisashley6611this is exactly what I have been trying to work out. Sure Edmund will have the answer 👍🏻
Thanks, understood and you are looking to calculate the Money Weighted Rate of Return (MWRR), based on the numbers you gave above the MWRR would be 6%. The easiest way to do this is via Excel using the XIRR formula. You have your starting value all contributions and any withdrawals and your ending value as a negative. Possibly one for another video but there should be some guides online showing how this is done. The manual calculation is far more tricky.
@@EdmundBaileyUK Thanks, Edmund. Very much appreciate your reply. Will look into using the XIRR formula. As you suggest though, this could be a great topic for one of your videos. I'm sure it would be warmly received by those who watch your videos which explain very clearly the process involved when making these calculations.
Another great video Ed, very informative an useful . The link to the file opens up the previous CashFlow Modelling file, is there a link to this Compound file
Thanks. I can add that one as well if it helps. Will add it later when back home. 👍
@@EdmundBaileyUK no worries I can build this compounding one, I incorrectly thought the link was to this new Compounding Calc one. Thanks again and enjoy the weekend.
@@neilhopkins-dl7vm www.dropbox.com/t/8DJnxBR14VEsp7LF
thanks for this - one question - at 7:37 is skips and jumps to the £35,000 figure in G23 - is this his gross salary? Which you've taken 8% pension contributions from?
Yes sorry, it’s just assuming an ongoing pension contribution based on 8% of a £35k salary, just as an example.
@@EdmundBaileyUK Thanks - it’s weird my pension contributions don’t seem to add up on my pay slip. (I’m on the basic 5% by me and 3% employee). Under deductions my contribution (pension (inc. AVC) doesn’t seem to match my salary (in terms of being 5%). Then neither does the work contribution. I realise you might not be able to help, but thought perhaps I need to work it out differently. As I’m on a higher salary than your example of £35k yet my contributions are less…
You could be on what is called 'Qualifying Earnings' meaning that the contributions aren't based on your whole gross salary but on 8% of a band of earnings between £6,240 and £50,270 pa. It's the absolute minimum as to what is allowed under Auto Enrolment. So in the example of £35,000 the qualifying earnings would actually be £28,760. And so the % is based on 8% of £28,760 = £2,300.
Definitely worth checking in case there is a mistake or asking HR/Payroll.
@@EdmundBaileyUK ah ok - yeah that makes sense - it is QE, the absolute minimum. So that seems to align up now. Thanks for your help.