Lately, I have been working on a calculator to model the potential growth of monies in a fund that has irregular cash flows. Essentially, I am modeling what a fund that targets a specific Internal Investment Return (IRR) will deliver in growth as someone invests or redeems cash at irregular intervals.
For simplicity’s sake, the spreadsheet is designed with cash flows around a formula. This helps with achieving long-term planning, but any of the cash flows can be replaced with your own formulas or static values if there is no formulaic plan.
If you imagine any kind of tradable security as a fund, then anything can be modeled over time, assuming that an IRR has been formalized in advance. This kind of calculator is especially helpful with mutual funds and PE funds that already provide you with target IRRs though.
How does it work?
Set your period, in years; set the IRR; and set your birthday and target age. You’ll also need to set the initial investment amount and how much you plan your first redemption to be along with whatever you plan your redemption increases to be over time.
From here, the calculator’s table should fill with values. If the table isn’t long enough, just increase its length. Any table rows that have a nicely tinted green background are rows that are within your target maturity zone.
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