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Recently, I have changed how the "P&L + Dividends + Closed" percentage was computed, from being based on "Current Cost" to "Total Cost" (read more about it in this article). However, several users have reached out and suggested that to base the "P&L + Dividends + Closed" percentage on "Total Cost" would penalize users who trade more frequently.

Upon further discussions, we came up with "Max Deployed Capital" as one possible candidate to base "P&L + Dividends + Closed" percentage upon. However, not everyone agrees that it is the best approach.

But perhaps, there is no single best approach. Rather, it's just finding the one that best suits you. Hence, you can now decide for yourself what your "P&L + Dividends + Closed" percentage should be based on via the settings here, with the default being set to "Max Deployed Capital".

To recap, here are the definitions and explanations of each.

**Current Cost**

*Definition*: "Sum of [buy price x number of shares] for each stock currently in portfolio".

*Explanation*: This is simply the capital currently deployed. StocksCafe have been basing "P&L + Dividends + Closed" percentage on this for a long while and maybe you are used to it. The weakness of
this approach can be seen here.

**Total Cost**

*Definition*: Current Cost + "Sum of [buy price x number of shares] for each closed position".

*Explanation*: This is the total capital ever deployed. There will be double counting if you buy and sell regularly and reinvest the money to buy other stocks. This is why several users believe this depressed the "P&L + Dividends + Closed" percentage.

**Max Deployed Capital**

*Definition*: The maximum current cost at any time point.

*Explanation*: This prevents double counting if user reinvests the money. However, if there is a huge capital outflow (and not coming back), then "P&L + Dividends + Closed" percentage will be depressed. Example: If I started with $100,000 worth of stocks but because I needed cash (for whatever reasons), I closed many positions and diverted the money elsewhere leaving only $10,000 worth of stocks for the next 5 years, then it might not be reasonable to compute the returns based on $100,000 (max deployed capital).

**Conclusion**

Each approach has its pros and cons and may suit different users depending on their situation. Hence, I leave it to you to decide what fits you best.

In any case, note that the most comparable and annualized way to compute returns is Time-Weighted and Xirr. They are shown in various places throughout StocksCafe.

Happy investing!

p.s.: Some people might be wondering why I am spending so much effort on this single percentage computation. This is because I believe in making StocksCafe better (more accurate or more perfect) one step at a time.

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By evankoh posted on 4 Aug 2017 - 14,204 views

Recently, I have changed how the "P&L + Dividends + Closed" percentage was computed, from being based on "Current Cost" to "Total Cost" (read more about it in this article). However, several users have reached out and suggested that to base the "P&L + Dividends + Closed" percentage on "Total Cost" would penalize users who trade more frequently.

Upon further discussions, we came up with "Max Deployed Capital" as one possible candidate to base "P&L + Dividends + Closed" percentage upon. However, not everyone agrees that it is the best approach.

But perhaps, there is no single best approach. Rather, it's just finding the one that best suits you. Hence, you can now decide for yourself what your "P&L + Dividends + Closed" percentage should be based on via the settings here, with the default being set to "Max Deployed Capital".

To recap, here are the definitions and explanations of each.

Each approach has its pros and cons and may suit different users depending on their situation. Hence, I leave it to you to decide what fits you best.

In any case, note that the most comparable and annualized way to compute returns is Time-Weighted and Xirr. They are shown in various places throughout StocksCafe.

Happy investing!

p.s.: Some people might be wondering why I am spending so much effort on this single percentage computation. This is because I believe in making StocksCafe better (more accurate or more perfect) one step at a time.

Like

20 likes

0 comments

Next Article > < Previous Article

Dividends Projection Completed! - Hong Kong & Malaysia ...

List All Articles

Net Worth & Financial Freedom Index

With the new ability to include any asset into StocksCafe, we can now compute some interesting numbers useful to almost all investors. I have created a clean-cut dashboard page to display these numbers. Net Worth I hope it is obvious why as an investor you need to know your net worth. In case it is not, you might want to google it or read these articles: here, here and here. Once you have included ...

Now Available: United States Stock Exchange Information!

After months of planning, sourcing, and coding, I am happy to announce that US data is now available in StocksCafe! It is not completely integrated yet, but some of the most popular features are already available. 1) Add to Portfolio or Watchlist: You can now add your US market transactions! You can also add US stocks to your watchlists. 2) Stock Page: Some basic information including dividends and ...

Do You Really Know How To Calculate Current Yield?

This seemingly simple equation is in fact not that easy to compute. I recently adjusted and optimized the calculation of Current Yield from insights and discussions that several users have brought forth. What is Current Yield? English Definition: Current yield is an investment's annual income (interest or dividends) divided by the current price of the security (Source: Investopedia). Mathematical Definition: ...

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