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What If You invested
Find out how much you would have now if you had invested in ...
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Overview
This is an investment analysis feature that lets you calculate your potential returns if you had invested in a security some time ago. This feature performs calculations in the background and displays the exact amount of opportunity cost of your investment.
The What if you invested feature requires some assumptions to be made, which have to be inputted by you, the user. The assumptions required are the timeline of investment (one year, three years, or five years) and the expected amount that you would have invested in the security.
The feature then calculates the present value of the investment and presents the percentage increase and the total value of your investment.
Methodology
The What if you invested feature works on pre-set formulations to calculate the change in stock price compared to the selected period ago.
This change is calculated in percentage terms, and then the exact percentage change is applied to the expected investment amount entered by you, the user. The newly estimated figure is then displayed on the webpage. This figure is the value of your investment if you had invested the amount.
Process
To use the What if you invested feature, one must provide some crucial details for the feature to function correctly. They are the invested amount, timeline, and listed company's name in which you want to invest.
Upon entering these details, the infographic will display the present value of your investment. It will also provide a list of historical prices of shares that include last traded price, price one month ago, three months ago, six months ago, one year ago, three years ago, and five years ago.
If the stock price grew during the selected period, the percentage change will be displayed in green, but if the share price fell during the period, the percentage change will be shown in red.
Formula
The feature runs on a standard formula of Holding Period Return (HPR).
The formula works by subtracting the Beginning value of the share from the share's Last Traded Price (LTP), and the difference is then divided by the beginning value.
The formula is explained below:
HPR = [(End - Beg) + Inc] / Beg.
| End | End stands for the Ending period value of the stock, also known as the Last Traded Price (LTP). |
| Beg | Beg stands for the Beginning period value of the stock. This is the stock price at the beginning of the selected timeline. |
| Inc | Inc stands for Income and represents any payment received from the company during the tenure of the timeline. |
Benefits
There are multiple benefits of using the What if you invested feature. Some of them are as follows:
More straightforward calculation of opportunity cost of investing:
The feature will help evaluate the return if you invested in the selected stock instead of any other investment. This is called the opportunity cost of investing.
Stock return analysis over the selected period:
The feature will directly tell us how much the stock returned over the chosen period.
Meeting financial goals:
The feature will let us know exactly how much return we can expect to earn if we select undervalued fundamentally sound stocks over a prolonged period of time. This knowledge will enable us to meet our short- and long-term goals easily.
