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What is the best source for finding 20 year returns for mutual funds? 15 years is the longest term the main Morningstar site provides. The only place I have found the 20 year returns is on the wells fargo site. The information is provided by and branded as Morningstar. It's calculated once a month at the conclusion of the month and takes a few days to appear. Any alternatives?
But it's still monthly. Cheaper than M*. Subscribing there is the main reason I started posting on this community. Which hopefully won't cast a negative light on the quality of data provided by premium.
You can do a limited test of the data for free using quicksearch, which is limited to five tickers.
You can coax 20 year data (or any other performance data you want) out of M* by using its charts and selecting the desired start and end dates. This works with both the legacy charts and the new ones. The granularity is one day.
It shows that $10K grew to $71,588.68. That's 7.158868 x the original value. To annualize, just take the 20th root (and subtract 1 to get the percentage increase). If you prefer, in Excel that would be EXP(LN(71588.68/10000)/20) -1. That's 10.34%.
You can do the same thing with the new M* pages, but it's a little harder to set the dates, and one can't link to the chart.
No M* login, not even basic, is needed to get these charts.
Enter 7.158868, press the x^y (power) key, enter 0.05 (1/20th), close paren ')', and =. Or enter 7.158868, press the y√x (root) key, enter 20, close paren ')', and =.
Thank you so much. That is super helpful. I had always believed that the calculation of annualized returns was some esoteric thing that I could never calculate.
Do you think there is a comprehensible way to calculate an annualized return given a series of annual returns, without going through the intermediate step of a starting and ending value?
Because returns compound, what you're computing is a multiplicative, or "geometric" average, rather than an additive, or "arithmetic" average. But the concepts are the same, so I'll try to address your question using the more familiar arithmetic average.
If I start with $100, and just add amounts every year (say, by savings, not by earnings), after 5 years I can ask: on average how much did I add per year?
Say I add $20, $50, $30, $40, $35. You can compute the average increment by adding them all up (to $175) and dividing by 5. (It's $35).
If I already know the ending amount of $275 (which is $100 + $20 + $50 + $30 + $40 + $35), then I know that all the yearly additions added up to (end value - start value) = $275 - $100 = $175. I divide by the number of years (5).
The point is that if you have the start and end values, you know what the difference is and you don't have to use all the individual values to compute their sum. If you don't have the end value, then it's easier to add up year by year. Either way, you divide by the number of years.
Same idea with annualized returns, except we're dealing with multiplication instead of addition.
For instance, if my $100 earns 10% one year and 20% the next, then after 1 year I've got $110 (10% more than $100), and after two years, I've got $132 (20% more than $110). That's 32% more than I started with. I don't get this by adding 10% and 20%, but by multiplying (1 + 10%) x (1 + 20%) = (1 + 32%).
As with the arithmetic average, if you've already got the end value, you can get the result of all the multiplications by dividing the end value by the start value. But if you don't have the end value, you multiply (1 + annual return pct) for each year, take the nth root (where N is the number of years), and subtract 1.
In my shortened example above, I multiplied the two years (10% and 20%), and got 132% (before subtracting 1). The 2nd (square) root of 132% is 1.1489, so the average annual yield is 0.1489, or 14.89%. A little less than you get by simply "averaging" 10% and 20%.
On the other hand, if I know that I started with $100 and ended with $132, I don't have to know how I got there. I just take 132/100 (i.e. 132%), and calculate as before. The 2nd (square) root is 1.1489, so the annualized yield is 14.89%.
Comments
But it's still monthly. Cheaper than M*. Subscribing there is the main reason I started posting on this community. Which hopefully won't cast a negative light on the quality of data provided by premium.
You can do a limited test of the data for free using quicksearch, which is limited to five tickers.
To find a legacy chart for a fund, use the link below, replacing FLPSX with your fund's ticker.
http://quotes.morningstar.com/chart/fund/chart?t=FLPSX
Here's the 20 year legacy chart (9/7/2000 through 9/6/2020) for FLPSX.
It shows that $10K grew to $71,588.68. That's 7.158868 x the original value. To annualize, just take the 20th root (and subtract 1 to get the percentage increase). If you prefer, in Excel that would be EXP(LN(71588.68/10000)/20) -1. That's 10.34%.
You can do the same thing with the new M* pages, but it's a little harder to set the dates, and one can't link to the chart.
No M* login, not even basic, is needed to get these charts.
Is there an easy way to get the 20th root on a standard calculator?
https://www.calculatorsoup.com/calculators/algebra/exponent.php
Scientific calculators often have power functions (x^y) and may have root functions, i.e. y-th root of x.
You can use the power function to get the 20th root by taking a number to the 0.05 power. If there's a root function, you take the 20th root directly.
For example, here's an online scientific calculator: https://calculator-1.com/scientific/
Enter 7.158868, press the x^y (power) key, enter 0.05 (1/20th), close paren ')', and =.
Or enter 7.158868, press the y√x (root) key, enter 20, close paren ')', and =.
Do you think there is a comprehensible way to calculate an annualized return given a series of annual returns, without going through the intermediate step of a starting and ending value?
If I start with $100, and just add amounts every year (say, by savings, not by earnings), after 5 years I can ask: on average how much did I add per year?
Say I add $20, $50, $30, $40, $35. You can compute the average increment by adding them all up (to $175) and dividing by 5. (It's $35).
If I already know the ending amount of $275 (which is $100 + $20 + $50 + $30 + $40 + $35), then I know that all the yearly additions added up to (end value - start value) = $275 - $100 = $175. I divide by the number of years (5).
The point is that if you have the start and end values, you know what the difference is and you don't have to use all the individual values to compute their sum. If you don't have the end value, then it's easier to add up year by year. Either way, you divide by the number of years.
Same idea with annualized returns, except we're dealing with multiplication instead of addition.
For instance, if my $100 earns 10% one year and 20% the next, then after 1 year I've got $110 (10% more than $100), and after two years, I've got $132 (20% more than $110). That's 32% more than I started with. I don't get this by adding 10% and 20%, but by multiplying
(1 + 10%) x (1 + 20%) = (1 + 32%).
As with the arithmetic average, if you've already got the end value, you can get the result of all the multiplications by dividing the end value by the start value. But if you don't have the end value, you multiply (1 + annual return pct) for each year, take the nth root (where N is the number of years), and subtract 1.
In my shortened example above, I multiplied the two years (10% and 20%), and got 132% (before subtracting 1). The 2nd (square) root of 132% is 1.1489, so the average annual yield is 0.1489, or 14.89%. A little less than you get by simply "averaging" 10% and 20%.
On the other hand, if I know that I started with $100 and ended with $132, I don't have to know how I got there. I just take 132/100 (i.e. 132%), and calculate as before. The 2nd (square) root is 1.1489, so the annualized yield is 14.89%.