tag:blogger.com,1999:blog-8091367287813993533.post7291360847594521876..comments2022-01-05T16:59:52.236-05:00Comments on Do-It-Yourself (DIY) Investor: How to Calculate Time Weighted ReturnRobert Wasilewskihttp://www.blogger.com/profile/04536814650758511673noreply@blogger.comBlogger20125tag:blogger.com,1999:blog-8091367287813993533.post-46534607254399921302016-01-09T09:28:11.974-05:002016-01-09T09:28:11.974-05:00Yes, each yiime money is put in or taken out the v...Yes, each yiime money is put in or taken out the value of the account has to be known. Then it is just a matter of doing the calculation as if there was no funds in or out. But this is like what happens when you have no money in or out. For example, if you had $1,000 on 1/1/2015 and it was worth $1,100 on 1/1/2016 your return is 10%. This includes interest, dividends, appreciation from unrealizedRobert Wasilewskihttps://www.blogger.com/profile/04536814650758511673noreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-82300964920061872092016-01-03T08:39:41.451-05:002016-01-03T08:39:41.451-05:00I don't understand the calculation. You have t...I don't understand the calculation. You have to have the dates of the investments to calculate the TIME (by definition) weighted rate of return. The calculation above is just calculating the simple interest.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-6272532621589190272013-01-07T17:07:58.215-05:002013-01-07T17:07:58.215-05:00In terms of investment fees - you are right they a...In terms of investment fees - you are right they are like a loss. If your return is 6.5% and you are paying 1% your bottom line is a return of 5.5%. It is why we stress fees so much. They make a huge difference over longer time periods!<br />Taking it a step further you may want to to consider after tax returns adjusted for inflation. So take off a bit more;)<br />diy investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-65530294295614610792013-01-07T17:03:10.943-05:002013-01-07T17:03:10.943-05:00I really don't have a method. My readers just ...I really don't have a method. My readers just check back from time to time. diy investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-33068764426570752212013-01-07T16:59:12.928-05:002013-01-07T16:59:12.928-05:00There is no difference between a dividend and an i...There is no difference between a dividend and an increase in market value. Everything that hits the bottom line is treated the same. What is the value of your account today? What is it before your next cash contribution from the outside? Divide the 2 and that's your return for the period. The next period start with the value of the account including the outside contribution (or withdrawl) anddiy investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-72541617830692991942013-01-07T11:17:23.828-05:002013-01-07T11:17:23.828-05:00I understand why cash contributions and withdrawal...I understand why cash contributions and withdrawals matter, but I don't see why a dividend paid, for example, has to be treated differently from an increase in market value of an equity, say, when looking at the account value at the end of a period.<br /><br />And what about advisor fees? Same argument -- at the end of the period, what's the difference between a loss in market value of $Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-26033039270522782322013-01-02T05:08:00.348-05:002013-01-02T05:08:00.348-05:00I am having a problem in the calculation of return...I am having a problem in the calculation of returns. I am trying to calculate return over a 16 year time horizon. I have the future value and the rate at which my assets will grow in individual years over the 16 years. I want to know that single rate which is the time weighted rate of return. I have managed to find that also but if i calculate the SIP amount based on that rate than there is a bigAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-24900968768883735772012-12-17T06:11:40.017-05:002012-12-17T06:11:40.017-05:00I just came across this entry and I am so fascinat...I just came across this entry and I am so fascinated by the style you organize your blog post! Which methods do you mostly turn to in order to tell your readers that you provided a brand new post to your website?RealMenRealTopicshttp://realmenrealtopics.com/noreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-60171533423093509452012-08-27T12:20:10.927-04:002012-08-27T12:20:10.927-04:00You highlight a problem with TWR that bedevils inv...You highlight a problem with TWR that bedevils investment managers. When starting accounts the money typically trickles in so for first 3 months you have $15,000 and then 6 months a rolled over 401(k) comes in for $1 million. TWR treats these cash flows the same. This is good in assessing one manager versus another manager but a 10% return on $1.0 million is clearly preferred to a 15% return on $diy investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-62231504654710686392012-08-22T22:37:10.950-04:002012-08-22T22:37:10.950-04:00So, I am not sure that the 'easy' formula ...So, I am not sure that the 'easy' formula works since it's not really time weighted. You can't just multiply two returns together to get a time-weighted return. You have to actually consider the time. In the example above, where you: "Start with $1000 and assume it grows to $1150, at which point you put in $300 and it grows to $1725" What if this happened over a oneAnonymoushttps://www.blogger.com/profile/14645910916830833517noreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-66194273331514371962012-07-25T08:44:57.710-04:002012-07-25T08:44:57.710-04:00Great post. That's why every transaction made,...Great post. That's why every transaction made, every money that comes and goes must be listed so you will have a reference to know if your investment is doing good or should you just move on to another career. Of course, this will take time so be sure you have the resources and exit know-how in any case you fail. Thanks for sharing.<br /><br /><a href="http://howtoretireplan.com" rel="Charles Bromleyhttps://www.blogger.com/profile/04273960093706296951noreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-27474428212739830582012-04-11T21:39:46.033-04:002012-04-11T21:39:46.033-04:00i don't understand at alli don't understand at allAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-25958195424103609032011-08-24T08:04:46.515-04:002011-08-24T08:04:46.515-04:00re: Financial Independence The type of question yo...re: Financial Independence The type of question you are trying to answer is as follows: I started with $1,000 5 years ago and today I have $1,750. What average annualized compound return did I earn? <br />To answer you divide the numbers and take the 1/5, i.e. .20 root - easy to do on the calculator. The answer is 11.84% (have to subtract 1 of course). As it turns out the return was achieved by DIY Investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-73921736796937352992011-08-18T02:01:03.385-04:002011-08-18T02:01:03.385-04:00Hi there,
Would it not be for the TWR example sake...Hi there,<br />Would it not be for the TWR example sake to advise taking average over the years, instead of multiplying them and taking 0.5 root? It will get more complicated, when you try to do it for a several years? ;-) While every body can add them up and divide by the number of years in question. <br />Just a thoughtFinancial Independencehttp://www.niterainbow.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-11355393001806791352011-06-11T15:10:24.394-04:002011-06-11T15:10:24.394-04:00re: Anonymous There is a slight correlation becaus...re: Anonymous There is a slight correlation because of momentum but overall your return very well could be negative for the year if the last 9 months are down more than 2.75%. To get the actual expected return you would need yto go back and find the average 9 month return over many 9 month periods.DIY Investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-31214623482999915782011-05-10T10:11:33.984-04:002011-05-10T10:11:33.984-04:00How does the time weighted return (net) for a qua...How does the time weighted return (net) for a quarter correlate the predicted return for the fiscal year? For example, if my portfolio had a time-weighted net return of 2.76 percent for the first quarter, is that the likely overall net for the year? Many thanks for your help!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-84619041508376844752011-01-27T13:55:56.137-05:002011-01-27T13:55:56.137-05:00@Shawn I think most people today don't have to...@Shawn I think most people today don't have to do the calculation but still its good to know how . It is sort of "yield-to-maturity" which is difficult to calculate. You never have to do it but it is good to know where it comes from because that helps us understand the influences on yield. <br />Thanks for stopping by.DIY Investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-70694883485879816792011-01-27T13:47:03.893-05:002011-01-27T13:47:03.893-05:00This wasn't bad to calculate, but my head stil...This wasn't bad to calculate, but my head still hurts! You have a good point about how small differences in percent is not great in the long run. I think we'll have to get better about following this as well. I feel like you just smacked our hands too :)Shawn Watsonhttps://www.blogger.com/profile/05668363529447868141noreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-20188316600700439302011-01-27T13:35:52.949-05:002011-01-27T13:35:52.949-05:00@Chad Good point. That's why I log in every da...@Chad Good point. That's why I log in every day and record the value of the account. Then I can always go back later and look at "history" to see I need separate calculations over different time periods.<br />I was reminded in reading your comment that investors have accounts at different brokers so they typically will need a further weighting to get broader performance numbers.<br DIY Investorhttp://rwinvesting.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-8091367287813993533.post-57709626653266317832011-01-27T12:44:31.910-05:002011-01-27T12:44:31.910-05:00Nice article. I think the problem many people run ...Nice article. I think the problem many people run into with calculating TWR is that the portfolio value is needed at the time of each cash flow in or out of the portfolio. This isn't always easy to figure out after the fact (for example when you sit down with your brokerage statement to calculate returns at the end of the year), so it is important to keep good records. I posted a similar Chadhttp://www.calculatinginvestor.com/2011/01/01/calculating-investment-returns/noreply@blogger.com