A python module for computing the internal rate of return of an arbitrary set of cashflows.
In addition some other functions are provided to compute metrics related to the compounded return of a regular investment.
python with numpy, scipy, pandas.
The investment_analysis.py module can be imported in an existing project.
Alternatively, use the provided command line interface in main.py.
Run:
python main.py --help
to print the available subcommands. Run:
python main.py subcommand --help
to see the required parameters and help for each subcommand.
Suppose you make irregular investments that make a varying return, say the stock market. What would be the constant interest rate that would have brought your investments to same value today? That is the internal rate of return. To calculate it, enter all the deposits into a csv file, in the format shown in sample.csv. Check the current value of your investments, say it is 5,000, and then run:
python main.py irr --csv_file sample.csv 5000
This prints a summary of your investment performance, including the internal rate of return.
Suppose you make regular investments in an account with a fixed rate of return, such as a savings account. Say you have a starting balance of 2,000, for the next 10 years or 120 months, deposit 1,000 each month and the account makes an annual return of 5%. To see what the value is after 10 years, run:
python main.py compound 120 1000 0.05 --initial 2000
If instead of in a savings account, you invest in a the stock market with an unknown return, you can first use the irr calculation to find the past performance of your investments. If the internal rate of return was 5%, this compound command will project the future value of your investments, assuming the internal rate of return stays the same.
Are you saving enough for retirement? Suppose the regular investments are in a pension fund. After first computing the irr on past investments, then projecting that forward using the compound command, you can find an estimate of what your pension fund will be worth at retirement age. How long can you draw income from that pension fund?
Let's say the projected value of the pension fund is 250,000 and the fund can continue to make a fixed return of 2% per year. You plan to withdraw an income of 1,000 per month. Run:
python main.py pension 1000 0.02 250000
to find out for how many months you can continue to draw income.
To compute how much is left in the pension fund after 10 years, use the compound command with a negative deposit:
python main.py compound 120 -1000 0.02 --initial 250000
The same calculations can be used to find out how long it takes to repay a debt. Suppose the outstanding balance on a mortgage is 150,000, the mortgage rate is 2%. The number of months it takes to repay the morgage, while making monthly repayments of 1,000 can be found with:
python main.py mortgage 1000 0.02 150000
To compute what the mortgage balance is after 10 years, use the compound command with a negative initial amount:
python main.py compound 120 1000 0.02 --initial -250000