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How to Simulate Reinvesting Dividends at My Portfolio CAGR?

Our plots of regular tickers such as T-GOOGL simulate the dividends are reinvested in the same stock. This is the industry standard, but it need not be always like this. Quite often, good investors click 30% return, maybe more. They often do this smartly reinvesting dividends and rebalancing.

How to Simulate Reinvesting Dividends at your Return Rate

Suppose your portfolio CAGR or compound annual growth rate is 30%. This means that if you have 100000 this year, next year you will have something close to 130000, exactly 30% more. Of course this growth will take place more or less on a daily basis and be subject to volatility.

When you plot T-GOOGL with our system, you are not simulating reinvesting the dividends from Google (Alphabet) into your portfolio and subjecting it to investment in whatever stocks you are currently busy acquiring. Instead, when you plot T-GOOGL it simulates you reinvest the dividends from Google (Alphabet) into Google stock as soon as the dividends are paid. This is the standard in the industry. Our data provider Tiingo provides this data in the column T-GOOGL-AdjClose. Since this is what most users want when plotting Google we make T-GOOGL default to T-GOOGL-AdjClose. There are more projection columns such as: T-GOOGL-SplitAdjClose and T-GOOGL-Close which you can read about at the bottom of every plotter page.

If you want to simulate reinvesting the dividends at a return rate of say 30%, then you have to use one of our functions called: SIMUL_TICKER_DIV_REINVEST(T-GOOGL,0.3,1,'2022-08-01'). The first argument of the function is the ticker you are simulating. It would only make sense with tickers that pay a dividend. The second argument (0.3) is your portfolio CAGR (i.e. 30%), this is the return you will get compounding over your dividends bucket for this stock. This function displays for every day both the dividend bucket and the stock price added (it does take splits into account automatically). The 1, which is the 3rd argument is the initial investment in the same currency as the stock price, this is one dollar, not one share. You can put two dollars or the price of one share at that date. The last argument, the date, is when you started this investment. This function can be combined in all our plots next to various functions. We demonstrate it below in the overlay plot.

Our tool allows you to plot a simulation curve that gives your total return of investing in say T-GOOGL while using their dividends (Google's dividends) to boost your own portfolio gains. Here is the result of one such simulations, we adjust the portfolio own return rate from 30% to 25% below: Overlaying an investment in T-MSFT and one in T-GOOGL, starting on the same day and with dividends reinvested at your portfolio return rate. For the up to date chart click here
In order to use this function you will have to copy and paste it and adapt it on other plotting screens.

This article is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Always conduct your own research or consult a qualified financial advisor before making investment decisions.