That seems like an excellent way to calculate returns. My only issue with it, is that if you use it over a period of several years, it would provide equal weighting of times you had little money and times you had a lot.
Ideally, I'd like to see it your (Fidelity's) way and also see another calculation that is dollar weighted, so when accumulating in a bull market, your more recent returns would be weighted more heavily. Ideally the dollar weighting would be inflation adjusted, so that inflation wouldn't cause more recent returns to be too heavily weighted.
My wish is for well written, reliable software to do all this for me, I just type in date, buy/sell, number of shares, symbol, commission, and it tells me the total amount as a check, and does all calculations for me, both the Justin way and the inflation adjusted dollar weighted way.
I'd also like it to chart my portfolio value vs what my value would have been if I instead did just TSM (like VTI) or did a specific S&D with rebalancing plan, but with the same $ contributions and withdrawals I actually made.
I'd also like world peace.
What I actually do, is figure that my w/r (I'm in withdrawl, not accumulating) is less than inflation, so just look at nominal value of my portfolio, and do simple % growth calculation, and take that as a conservative estimate of real return. Portfolio (value today-value at Dec 31)/value at Dec 31.
Originally Posted by justin
Using a spreadsheet, it only took me 5-10 minutes to determine a personal rate of return for my latest investment that had 11 purchases this year.
You're way faster than me.
I never have computed my return for before I stopped working, since there were so many contributions, and sales that weren't immediately reallocated.