Determining a 79-Year-Old Gain

Q If I had put $1 in the market after the crash of 1929, how much would it be worth today?

— Jim Gargotta, via e-mail

A Not everyone realizes it, but the crash of 1929 really occurred over several months, not hours. The Dow Jones industrial average ("the Dow") peaked in early September 1929, at 381. It then slid down to 199 in mid-November, before rising again to 294 five months later, in 1930. (In October 1929, it slid more than 11 percentage points on two successive days.) From there it began a long descent, falling to 41 in July 1932.

With the Dow recently around 9,000, it's up some 220-fold since the low of 41. That's enough to turn your $1 into $220.

Q If I've made multiple purchases of a stock over time, how can I figure out my annual return?

— M.W., Norwich, Conn.

A What you want is the "internal rate of return" (IRR). If you invest $1,000 and it grows to $2,000 in one year, your holdings advanced 100 percent. (Congrats!) But if you invest $1,000 and then add $500 midyear, and then end the year with $2,000, your holdings didn't appreciate by 100 percent. Part of that gain is simply from the midyear cash infusion.

Calculating an internal rate of return can be very complicated. One shortcut is to plug your numbers into a spreadsheet on your computer and to use its IRR function to do the math for you. Another possibility is to enter your portfolio into an online portfolio tracker that calculates IRR.

To learn more, go to an online search engine such as www. google.com and type in "internal rate of return.

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