Breakeven

Hi Everyone,

Today I have come across an interesting topic in HWZ forum where there is a new investors talking about calculating break-even for a counter.

When he/she asked that question, in my mind, I already had my own way to calculate my break-even point. So I explain to him/her my point of view. 

This is the example that I provided:

[(Current Share Price * Number of Shares) + Dividends collected up till date] - [(avg share price purchased * Number of Shares) + commission (both selling and buying)] = x

If x < 0, it will mean that you are still losing money 

If x = 0, break-even

If x > 0, profited from your investment 

Of course, this is just a standard way to calculate break-even, or let's say explain about break-even.

For me, I take a step more when it comes to calculating break-even point. My personal formula adds a bit of thrill in it  

My formula:

[(Current Share Price * Number of Shares) + Dividends collected up till date] - [(avg share price purchased * Number of Shares) + commission (both selling and buying)+ (number of year invested*dividend per year)] = x

If x < 0, it will mean that you are still losing money 

If x = 0, break-even

If x > 0, profited from your investment 

*I will be doing a round up to the years, for example 1 year 1 month, I will round up to two years worth of dividend

So the final portion is the additional thing that I have take into consideration, which is the dividend * number of year invested.

So why do I do that? The reason is because I want to take into consideration of opportunity cost. For example, if I invested $5000 in Sheng Siong, I will have $5000 less in my OCBC 360 to collect interest or other methods of investment. So in order to make sure that my money stays in a good shape, I will always include one year worth of dividend into my calculation before selling. 

If I can hit the break-even point in just a few months (like 2 to 3 months) I will sell it to lock my profit. I believe this can be done for growing stock and other blue chips which had sudden spike in it. For REITS, I will be putting there for a few years before selling it. 

How about you? How do you calculate your own break-even point?