The basic problem is that the IRR formula is what’s called an nth root polynomial (n is the number of days in the IRR calculation). A one-year IRR calculation is a 365th root polynomial. (Remember that Quicken calculates daily IRRs and then annualizes these daily percentages.) Continue reading
Category Archives: Online investing
Online Investing: Some Mechanical Problems with the IRR
Now that you understand the basic logic of the IRR tool, you should know that the IRR, for all of its usefulness, isn’t flawless. Quicken (and every other investment record-keeper’s computer program) calculates a daily IRR and then multiplies this percentage by the number of days in a year to get an equivalent annual IRR. Continue reading
Online Investing: What Is an IRR?
The IRR tool calculates the annual profit an investment delivers as a percentage of the investment’s value at the start of the year. For example, in a simple case, if you buy an investment for $100 and the investment pays $10 in dividends at the end of the year and then is sold for $95, your IRR is 5 percent. Continue reading
Recording Early Withdrawal Penalty Transactions
Early withdrawal penalties on certificates of deposit are a special type of tax-deductible expense. Like IRA contributions, alimony, and a few other items, these penalties are deductions from your total income and are used to calculate your adjusted gross income. Continue reading
Describing the Bonds You Sell
Describing the bonds you sell is easy as long as you have the necessary information: the number of bonds sold, the price per share (or the transaction total), and the commission paid (if any). You also need to know the amount of accrued interest you will be paid. As with other investment transactions, you can record bond sales either directly into the register or by using an investment form; using an investment form is easier. Continue reading