Rob Gravelle

It's important to be able to measure the performance of your portfolio against its relevant benchmark in order to gauge how well it's doing. The standard measure of all investments is annualized returns, expressed in percentage. That is to say, how much would your investments have changed in value over one or more one year time frames. The reason that I say one or more is that your actual investment time frame may be less than one year or a number of years in length. In each case, you have to be able to convert your gains or losses into a yearly percentage figure. Armed with that information, you can then determine whether to make changes to your portfolio or leave it be.

For instance, say that we have an investment which begins with $10,000 and, after 26 months, has become $12,199.25.

The first step in calculating the annualized returns is to come up with the Gain Factor, which is the total multiplier required to give us the final value. To determine the Gain Factor, we divide the final number by the starting one and add 1 to it. Hence, in this case, the Gain Factor is 12199.25/10000, giving us a Gain Factor of 1.219925. To express that as a percentage, subtract one from the Gain Factor and multiply that figure by 100. Congratulations are in order, as our investments garnered a total gain of just under 22%.

But that still doesn't tell the whole story, because the investment time frame is 26 months. To really understand how well our investments fared, we need to figure out the Annualized Return. The formula for calculating the twelve month Gain Factor is as follows:

12-month (Annualized) Gain Factor (R) = (1 + N-month-Gain)12 / N 

If we know that the Gain Factor = 1.219925 over 26 months then we can calculate the Annualized Gain Factor (expressed as R) as follows:

R = 1 + 0.21992512/26   
  = 1.2199250.46 (use the [x^y] button on your calculator for this step)
  = 1.096 or 9.61%

Since months differ in length, it's better to use days, so that:

Annualized Gain Factor (R) = (1 + N-day-Gain)365 / N 

Here's a calculator that works out the exact number of days for you to arrive to a fairly accurate Annualized Gain percentage:

Initial Portfolio Value: $
Final Portfolio Value: $
Start Date:
End Date:
Annualized Gain:

Note that the above calculations are based on a 365-day year and does not take leap years into account. They are only applicable to a lump sum investment without subsequent investments or withdrawals.

The up-coming issue or Rolling Stone magazine will feature another Top 10 list of the greatest guitarists - the same one that many magazines and websites publish every so often.

Is it just me or are the results getting boring and predictable? OK, Hendrix is the best. I get it. Van Halen is amazing. Check. Jimmy Page is a guitar god. You're preaching to the choir buddy! I worship the guy.

Just for once, I'd like to see a list with more contemporary artists. Most of these guys had their heyday before I was even born, and I'm not a young man! Maybe then we could get someone from Canada on there. I may not be Top 10 material – I’d be happy to land anywhere in the top 50! - but the Great White North has some serious talent, like Alex Lifeson, Rik Emmett, Jeff Waters, Ian Chrichton. You get the idea.

Could it be another case of popularity rules? You can't sell magazines if the people aren't famous...like really famous. Now that I think about it, the same thing happened to me with People's Sexiest Man Alive issue. I don't recall ever getting so much as an honorable mention...