When are we ever going to use this?!
How many times did you say that in school? I happen to be about 500x more stubborn than the average person. As a result, I said it nearly every day. Diagramming sentences? The date that Sam Houston pulled the sheets over Santa Anna? Algebra? To all of these, I really, truly wondered when on God’s green earth I would use them.
Today, I used Algebra!
I am building a website that is based on an investment portfolio. The equation wasn’t really that difficult, but I had write it down to sort it out.
Let’s say I have 6 securities with various share volumes that comprise a my portfolio. Let’s say you have $362,500 and you want to mimic my portfolio. How do you figure out how much of each share to buy? Let’s start with what we know:
| Security | Volume | Price |
|---|---|---|
| AAPL | 1500 | $250.00 |
| MELI | 1000 | $50.00 |
| CERN | 2500 | $90.00 |
| T | 5000 | $25.00 |
| GOOG | 500 | $475.00 |
| CTRP | 750 | $38.00 |
So, I first figured out the total amount of the portfolio that I started with:
Volume * Price for each security = $1,041,000
The portfolio that wants to mimic this portfolio has $362,500. So, next we figure out what percentage our mimicked portfolio is of the original one:
($362,000 / $1,041,000) * 100 = 34%
That left me thinking I just needed to multiply the share volumes by 34% in order to mimic the starting portfolio:
| Security | Volume | Price |
|---|---|---|
| AAPL | (1500*.34) = 510 | $250.00 |
| MELI | (1000*.34) = 340 | $50.00 |
| CERN | (2500*.34) = 850 | $90.00 |
| T | (5000*.34) = 1700 | $25.00 |
| GOOG | (500*.34) = 170 | $475.00 |
| CTRP | (750*.34) = 255 | $38.00 |
For all you math wizards and adults, I am aware this is not rocket science. However, it does show that there’s a need for basic algebra skills outside of the classroom. p – 1 = 5p +3p – 8 doesn’t really look like much in a classroom. I’m a firm believer that more US schools should teach using real world examples. Make it fun.
This might be the lamest post I’ve ever written, but I actually got excited when I realized I had used some form of algebra to solve the equation.
