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Different Methods of Calculating Profit

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timetotrade supports the following methods of calculating the profit on investments in your portfolios:

Pooling

This method uses pooling to calculate the cost and related return. When shares or units are acquired, the number of shares or units in the pool increases and the amount paid for them is added to the cost of the pool. For example assume 100 shares in ABC plc are bought at at total cost of £100; after the acquisition the number of shares in the pool are 100 and the total cost of the shares in the pool is £100. If another 400 shares are purchased at a total cost of £900, then the number of shares in the pool is increased to 500 and the cost of the shares in the pool is increased to £1,000.


When shares or units are disposed of, then the number of shares or units in the pool are reduced based on the number disposed of, and the cost of the shares or units in the pool are reduced in proportion to the number sold versus the number originally in the pool. Continuing the previous example were there are 500 shares in a pool with a share pool cost of £1,000, if 125 shares are sold, then the cost of the shares is reduced by 25% i.e. 125 shares sold / 500 shares in the pool = 25%. Therefore after the 125 shares are sold, the remaining cost of the 375 shares in the share pool is 75% x £1000 = £750.


Absolute Return

The Absolute Return method calculates the cost of the shares or units in a given company or fund, by determining the total cost associated with the open position, divided by the number of shares or units owned. The total cost is based on the total expenditure associated with buying shares and options (including broker fees and stamp duty), less any income received from dividends or gains or losses associated with selling shares and options. For a detailed discussion on this method click here.


The Absolute return is a very effective way of determining your overall return on a position if you are actively trading an investment as it provides a rolling view of your return.


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The information and data provided is for educational and informational purposes only. Interpretation and use of the information and data provided is at the user's own risk. All information and data on this website is obtained from sources believed to be accurate and reliable. However, errors or omissions are possible due to human and/or mechanical error. All information and data is provided "as is" without warranty of any kind. We make no representations as to the accuracy, completeness, or timeliness of the information and data on this site and we reserve the right, in its sole discretion and without any obligation, to change, make improvements to, or correct any errors or omissions in any portion of the services at any times. Past performance is not a guarantee of future results. Trading carries a high level of risk to your capital and can result in losses that exceed your deposits. It may not be suitable for everyone so please ensure you fully understand the risks involved.


All services are provided by Mercor Index Ltd. TimeToTrade is a trading name of Mercor Index Ltd (a company registered in England and Wales under number 9479466). Our Registered address is 34-36 St Georges Road, Brighton, BN2 1ED. Mercor Index Ltd is authorised and regulated by the Financial Conduct Authority number 679941.


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