Saturday, November 26, 2011

COI and ROI – The dream portfolio

With all this information entered in your spreadsheet, the computer goes to work and voila! 4.3 milliseconds later the portfolio that generates the lifestyle you want is displayed. You can run this spreadsheet for your current situation to get an idea where you stand,  or for your ideal situation, or for what you feel you need as retirement income.

The resulting portfolio will then set the goal you wish to achieve in order to live your personal Belize. It also determines what your level of diversification ought to be at various stages in your live. The portfolio below is based on the previously used income stream numbers and assumptions.

Click on the image to enlarge

Finally, the spreadsheet also shows you the performance ratios such a portfolio should produce (over the longer term). It shows your COI on total portfolio investment and your total return on investment (ROI). It further shows, the amount of annual savings as a percentage of your portfolio value available for reinvestment. The savings/portfolio ratio plus your portfolio appreciation is the total annual portfolio growth which should be higher than inflation. If it is lower than inflation, your portfolio, in terms of purchase power, would decline over time.

Now you know how much cash flow comes in and whether you have the means to hold on to your portfolio while waiting for appreciation to take place whenever that exactly may be. This approach should get you through today’s volatile markets. If you want to try out the spreadsheet for yourself, send me an e-mail. Of course, I provide no guarantees about the spreadsheet – in using it, you accept the responsibilities of the results (good or bad).

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