Internal Rate of Return in Advanced Portfolio

[Thomas Anderson]

On Tue, Nov 10, 2015 at 07:37:27PM +0000, Wm... wrote:
> Looking at a diff between the current
>
> advanced-portfolio.scm
>    and
> http://lists.gnucash.org/pipermail/gnucash-devel/attachments/20110110/935
> f42b3/attachment-0003.bin
>
> the IRR bits seem fairly self contained.
>

Agreed; there are only a few places where the code was reshuffled that I am having trouble with.
But I
blame my inexperience.

> The thing I wonder about is if an IRR wouldn't immediately result in person
> A wanting it to be tweaked this way, B arguing it should be done slightly
> differently and C wanting something else included or excluded.
>

I don't know that that's the case; IRR is a simple calculation without much tweaking, so long as
you enter correct data on the starting dates. Perhaps you have others in mind, but the only wrinkle
I can think of is:

(*) Person A wishes to treat Dividend Income separately and use IRR for only price appreciation;
Person B wants to look at the IRR of total return.

I'm not sure how to handle this or if it is worth ignoring.

> Also, does IRR as an into-the-future calculation or tool for deciding
> between prospective investments fit in with the rest of gnc's functionality
> generally?
>
> In short, isn't this the kind of thing spreadsheets will always do way
> better than we could ever do?

I don't see IRR as an into-the-future calculation nor for deciding between investments. I thought
that tangent in the original thread discussion was a bit of a mischaracterization; certainly
for stock investment accounts this is not the case. IRR serves roughly the same purpose as "Rate of
Return" currently does in advanced portfolio, but is more intelligent: adding $5,000 to a $1,000
account today doesn't affect the IRR number but does affect the rate of return significantly. And
the same is true for less extreme situations, IRR is simply a more robust accounting of how
investments have previously done.

I hope that makes it clearer why I think this is a useful feature.

Cheers,
Thomas

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