Computing compound returns returns

spartan1

Hi i like to seek some info on calculating compound returns
lets say i have 2 stocks, Stock A and B

Stock A i invest $1000
Returns $1500
50% return

Stock B i invest $1000
Returns $2000
100% return

Is my calculation right as shown below?
Hold for 2 years then sell, therefore my calculation will be: [(1+0.5)*(1+1)]^0.5

Lets say i have a third stock call Stock C and i lost everything in this stock which means 100% loss.

Stock C i invest $200
Returns $-200
-100% return
How do i calculate this into compound returns? should it be [(1+0.5)*(1+1)*(1+(-1))]^0.5

If i use the method above by including stock C, i will get an ans of zero even when stock C investment is less than A and B.
Is my method correct or i should i use this method to calculate:

[(1500+2000+0)/(1000+1000+200)] - 1

Then take the ans above and calculate using power of 0.5

Pls advise..
thanks



Edited 1 time(s). Last edit at Sunday, February 27, 2011 at 04:33PM by vitalstrike82.