Hello!
This post is in regards to my simple at home record keeping. You see, I still like to write out my accounts by hand in a notebook, as one would do with a checkbook.
When it comes to IRA accounts or Investment accounts, I have actually honestly only kept track of how much I was putting in.
So, my book looks like this (these are made-up numbers):
1-1-16 Contribution 500.00 Total 500
2-1-16 500.00 1000
3-1-16 500.00 1500
My actual account will actually be something like 2200 because I will have made investment gains. The reason why I have only listed what I have put in is because I understand the market goes up and down and knowing the amount I have put in has served as a baseline of which to compare how my account returns are doing.
Well, as I get more and more money, I want to keep track of my investments in such a way that I know exactly what my rate of return is for the year as well as what my rate of return is for the entire period (over 30 years or something going forward).
So, I've come up with this:
I have one section in my notebook that actually lists how much I contribute each month as well as how much is gained or lost each year. The value of the account in real life will be the same value that my notebook lists. I will only reconcile the actual value to the value in my notebook once a year as a yearly gain or loss so that I'm not looking at my accounts like a hawk every week or month.
In addition, I would also have a separate page that lists how much was contributed for each year as well as what percent was earned/lost for that year and what percent the average return is for the entire life of the account.
Year Amount contributed Actual Amount in Account Percent gain or lost that year Percent Return Since Inception
2015 10,000 10,300 3%
2016 11,000 22,365 5%
2017 10,500 32207.70 (2%) negative
2018 9,000 45,328.47 10%
2019 10,000 64,181.03 16% ???????
My question is, how would I determine what the average rate of return is for that entire period (to be put in a 5th column)? Or, what is a better way of tracking these accounts. I don't want to simply have a page in my notebook that tells me how much is in my account. I want to instead be tracking these accounts in such a way that I know if they are doing good or not. If the total in my account drops 50% one year, but I still see that I've enjoyed a rate of return of 5% since inception, I won't really care if it drops 50% you know. I basically want to buy and hold like we are supposed to do and have a book keeping method that matches that perspective.