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SSG Section 5 - 5 Year Potential
Rank: Advanced Member
Posts: 18
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We just finished our monthly meeting and one of our members asked a question I could not answer. On the SSG, section 5, 5-Year Potential; there are two different sections that give us results, but often they differ. Which one should we rely on?
Section 5-B: Average Yield + Annual Appreciation = $ Compd Ann Rate of Ret
In the example in question (EBAY) the return rate is 13.9%
Section 5-C: Average Total Annual Return over the Next 5 years 18.3%
Is there a number we should rely on more than the other. It almost sounds as if they are talking about the same thing, however the numbers come up differently. I've gone back to the Iclub tutorial and I don't have any better understanding.
Thanks,
Jeanie Krieger
Trader Jane's Investment Club
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Rank: Advanced Member
Posts: 105
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"% Compd Ann Rate of Ret" is Compounded Annual Rate of Return; that's the one you want to pay attention to. With compounded return, it takes about 15% to double an investment over 5 years. It's not really Section 5B, but I can see why you might think it is from the layout of the form.
Section 5-C, "Average Total Annual Return Over the Next 5 Years" is *not* a compounded rate of return and is best ignored. With this "simple" (not compounded) return, it takes 20% to double an investment over 5 years. Section 5C of the SSG is there to make the math simple for those doing the SSG by hand. It's obsolete for a computer generated SSG.
-Jim Thomas
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SSG Section 5 - 5 Year Potential
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