Why are investor and portfolio returns different?Īs you saw in the example used to illustrate investor and portfolio returns, both returns were different. So, we say that the portfolio return, from January 1st, 2012 to January 1st, 2014 was 12.69%. To calculate the portfolio return, we look at the return of each sub-period (e.g. Portfolio balance (after contribution) on January 1st, 2013: $8,937.50.We will use the same example that we used to illustrate investor returns, but we need some additional information (in bold): In other words, the portfolio return tries to remove the impact of contributions and withdrawals during the time period, and to only report the return of the underlying portfolio. It represents the annual rate of return of a single lump sum invested in the portfolio during a selected time period. The portfolio return is also called time-weighted return or comparable return. So, we say that the investor return, from January 1st, 2012 to January 1st, 2014 was 10%. On January 1st, 2012, the savings account balance would have been $5,000.What should have been the interest rate on a savings account so that the final balance would be $5,150? The answer is 10%. Portfolio balance (after withdrawal) on January 1st, 2014: $5,150.January 1st, 2012: Create portfolio with an initial deposit of $5,000.
It represents the annual rate of return of the invested money while taking into account the timing of various contributions to and withdrawals from the portfolio.Ī simple way to understand investor return is this: it is the interest rate on a savings account, such that the same sequence (and timing) of contributions and withdrawals would end up with the same final balance. The investor return is also called money-weighted return or internal rate of return. Portfolio returns (time-weighted returns, comparable returns) for 1 month, 3 months, 6 months, year-to-date (YTD), 1 year, 3 years, 5 years, and 10 years periods.The investor return (money-weighted return, internal rate of return) for the entire investment period.Portfolio balance at the close of the last day of the month.(Money removed by the investor from the portfolio, excludes any internal cash flow such as fees).
(Money added by the investor and his employer to the portfolio, excludes any internal cash flow such as dividend payments). Each month, the investor must to provide three pieces of data per account: The spreadsheet can calculate returns across multiple accounts.
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