I am trying to figure out the best way to determine gains in my margin account. Hypothetically, consider the following scenario. My account had a cash value of 100,000 on Jan 1. I infused the account with 100,000. Through a series of incredibly lucky trades the account value increased to 300,000. Then I withdrew 100,000 to pay off a low interest loan not related to market expenses. What are my YTD gains? My account started with 100K and now has 200K and I withdrew an amount equivalent to all deposits for the current year. Are the gains 100%? Or, are the gains 33%? Or something else?
Thanks everyone. I may just buy a pair of cargo pants.
Meanwhile, I sure hope that the PBW has bottomed for the day. I added long (adjusted stops) more solar. HOKU is just not tripping my triggers though.
I know that I have written a few times that an individual stock is merely a horse to me. My primary interest is in market conditions. I overstate my case. I firmly believe that knowledge, all knowledge, leads to power and success. Thus, I read this board. I saw this video last night of Howard Lindzon (Wallstrip fame) being interviewed by Yahoo. He too, overstates his "philosophy." but he is closest to my cynical view of the market and is much entertaining than me. Sorry for the self-indulgence.
Math is our friend, not our enemy. If you invested $200,000 and turned it into $300,000 then you made a 50% gain. That's all there is to it. When you have a math problem, most people try to make things more complicated than they really are. Even though you have twice as much as you did at the start of the year, you made 50% so far. Stick with Hoku and you'll not only hold on to those gains, you'll add to them.
Yes. Thanks for the thought. I considered an extreme case whereby I might have started the year with zero, infused 100K, gained 50K, and then withdrew 100k leaving 50K in the account. My earlier calculation would have resulted in either infinite or undefined gains. Clearly misleading. Playing around with this kind of thing gives me an appreciation for how a CEO or CFO can get themselves in trouble.
Thanks for your comment. The deposits provided leverage to support the gains. I don't know what is meant by "abstraction" in this case. I suppose the conservative measure of performance would be to somehow account for the risk entailed. Thus, maybe 50% is the better measure. If there were no withdrawals then I would calculate the gain to be current account value - (account value on Jan 1 plus net deposits) / (account value on Jan 1 plus deposits) X 100. Or, (300-200)/200. This would equal 50%. Deposits and withdrawals complicate this in my mind.