Chapter23:

Appraising Your Financial Results

"If you don't know where you're going, any road will get you there."

 

            NAIC recommends setting the goal of doubling your money in five years because with proper research and diligence, this goal can be reached and it is realistic. Five year intervals span the average time between market peaks.

 

Three tests to judge how well your club is doing:

1.Determine your actual rate of return by using the procedure outlined in this chapter.

2.Evaluate your results against a broadly based market index, such as the S&P 500.

3.Evaluate your results against those of other clubs of the same age by entering NAIC's annual performance survey.

 

            Success doesn't demand that you meet or exceed your established standard; setting a goal is only a means of giving yourself a measurement and a focus.

 

Procedure for Calculating Returns:

 

            The method for calculating your reate of return is based on the assumption that member contributions have been made every month in unvarying amounts, exclusive of reinvested dividends.

 

1.Determine the market value of the individual capital account as of the close of the last fiscal year.

2.Determine the total annual individual investment by multiplying the monthly contribution by 12.

3.Divide the amount in step 1 by the amount in step 2 to the third decimal palce.

4.Determinit the number of fiscal years over which the annual contribution has been made.

5.Locate the row in the compound annual rate of increase chart corresponding to the number of years in step 4.

6.In the row for the number of years, find the number closest to the quotient referred to in step 3.

7.Tead up to the head of the column for the percetage figure representing the compound annual rate of increase in the value of the individual capital account.

 

            If your club is initially successful, don't allow your club to become overconfident, and don't be discouraged if you are not ahead of the game from the start. Clubs typically lose money the first year or two, until reinvested capital gainsand dividends begin to have an effect; remember that you are in the market for the long term.