YTD 2006 investment

[LOL!]

If I take what I have now and compare to what I had 12/31/2005, then I'm up 20% YTD with a 80% stock, 20% fixed portfolio.

But suppose I started with $10,000, contributed $100,000 and lost $98,000, so I ended up with $12,000. That would calculate to a 20% return by the "what I have now" versus "what I had then". Would you be happy with a 20% return on your way to losing $98,000?

 

[Nords]

The ER portfolio (93% stocks, 7% cash) is up 14% YTD according to Quicken's "ROI YTD" column.

Thank you, Warren Buffett and those wild-eyed hard-partyin' boys at Tweedy Browne...

 

[Bikerdude]

But suppose I started with $10,000, contributed $100,000 and lost $98,000, so I ended up with $12,000. That would calculate to a 20% return by the "what I have now" versus "what I had then". Would you be happy with a 20% return on your way to losing $98,000?

You're correct. I calculated my return based on my circumstances only. It's not appropriate for everyone. Especially if you're adding substantial amounts during the year although it can still be calculated in the same manner just not quite as simple or quite as accurate as other methods.

 

[Leonidas]

MS Money's ROI column says my portfolio of 97% individual stocks is up 13.9% YTD.

 

[Bikerdude]

This might be OK if you didn't add or take out any money from the account. But why should we subtract out expenses?

By expenses I mean living expenses taken from your account not investment expenses. Sorry for any confusion.

 

[retire@40]

What's wrong with taking your balance on 1/1/06 and comparing it to what you have now minus expenses if any?

Because if everyone follows that formula they would get the wrong result.

That formula only works if you don't add any new money to your investments and/or take money out.

The part that messes a lot of people up is the intra-year additions and deductions in their portfolios. That's what happened to the "Beardstown Ladies."

 

[Sam]

Thank you all for your vote. As expected, the majority does better than S&P 500. This is indeed the ER forum

 

[Sam]

You all must be 100% (or more) invested in stocks.

How do you do more than 100%? You must be talking about margin? No, I quit margin a long time ago

 

[AltaRed]

The Quicken answer using "Current Year" is 10.4% which is how I voted to compare directly to S&P YTD. Based essentially on a 60/40 portfolio and in Cdn$.

Cannot use the Quicken YTD calculation methodology because it is important not to presume current ROI as of today is projected through to year end.

 

[LOL!]

MSMoney says current year is 13.9%. Our portfolio is 80% equities, 10% bonds and 10% cash.

AltaRed, MSMoney does the same thing with YTD returns: it annualizes them, so gives something like 15.4% YTD.

Alrighty, I guess this means a 15% correction in December?

 

[bpp]

nm

 

[old woman]

Very true. And I would guess the majority of answers here are a best-guess estimate, not a precise scientific calculation.

For example, if somebody held cash and invested that cash immediately before the market surged a couple of months ago, that person cannot use the reported YTD return on that investment as his own YTD return.

Personal ROI is a more complicated calculation when personal funds are added and subtracted from investments and transfers are made between various investments.

I borrowed 114K on my house the first of August and invested it in mutual funds. They are up about 10% already. I invest twice a month the first 8 months of the year and once about the 5th of January so I don't bother to try to figure out my YTD or anything it isn't really important to me. I made about 31K total this year so far but had all different amounts invested for different amounts of time.

 

[retire@40]

I borrowed 114K on my house the first of August and invested it in mutual funds. They are up about 10% already. I invest twice a month the first 8 months of the year and once about the 5th of January so I don't bother to try to figure out my YTD or anything it isn't really important to me. I made about 31K total this year so far but had all different amounts invested for different amounts of time.

Exactly what I'm talking about. I don't even think JG can figure that one out.

 

[terminator]

Exactly what I'm talking about. I don't even think JG can figure that one out.

What I do is used a "time weighted capital" approach.

Two examples:

If you start the year with $100 and end with $110, it's easy -- 10%. ($110-$10)/($100 * 365/365)

If you have $50 on 1/1/06, add another $50 on 7/1/06 and end with $110, you weigh the 1/1/06 capital at 100% and the 7/1/06 capital at 50% (half of the year), so you make $10 on a investment of $75, or a 13.3% return. ($110-100)/(($50*(365/365) + ($50*(182/365)))

I don't know if this is the "correct" or "professional" approach, but it gives me meaningful results. I have no idea whether this is an accepted method of calculation b/c I made it up for my own calcualations.

 

[brewer12345]

Time-weighted is a reasonable way to do it, but any method introduces distortions when you have capital flowing in and out intra period. I have money flowing in and out all the time, so it is tough to get more than horseshoe close on performance numbers.

 

[LOL!]

Here's another example to think about in your calculation. Suppose you have $100 and invest January 2006. In the beginning of May 2006, you see things have gone up to $120, so you sell. You buy back in July 2006 and things go up another 10% leaving you with $132.

Your average ROI on your investments individually is 20% on the $100 and 10% on the $120. You could compute a weighted average ROI which gives you 14.5%, but your really got 32% ROI.

The "correct" approach means you use Quicken, MSMoney, the XIRR function in Excel, or other software like PFROI. These all take into buys, sells, reinvested dividends, and time. And even with these programs, we see there are issues with "annualized YTD" versus "current year".

 

[Cb]

Thank you all for your vote. As expected, the majority does better than S&P 500. This is indeed the ER forum

We're all excellent drivers as well.

Cb

 

[rs0460a]

Did you plan it, or is it just "one of those things" that it's a normal distribution (bell curve) at this time?

 

[REWahoo]

Since I’ve already FIRE’d, I’m watching all the gyrations on this thread about the ‘right’ way to calculate YTD returns with more than a little amusement. Rather than try to measure my returns with a micrometer and get a precise percentage (and be sure the rest of you aren’t calculating your returns incorrectly, or heaven forbid, cheating ), I look at it this way: Our savings and IRA’s have been the sole source of our income for the past 18 months, and after all withdrawals our total is up $100k from when I retired.
I don’t care what % that represents, it works for me...

 

[Nords]

I look at it this way: Our savings and IRA’s have been the sole source of our income for the past 18 months, and after all withdrawals our total is up $100k from when I retired.
I don’t care what % that represents, it works for me...

I enjoy it. I look at these threads this way:

"Oh yeah? Yeah?!? Well-- well-- I'm up $100,125.73 this year!* So how about that, huh?!?"

*Accrual accounting method using a 360-day fiscal year, adjusting for CPI-U, not wage indexed, pre-paid bills at 85% marked-to market, including home equity but not the mortage, plus all the food in our pantry but not the zero-interest balance transfer credit-card money we've stashed in CDs. Because that would just be wrong.

 

[rs0460a]

I enjoy it. I look at these threads this way:

"Oh yeah? Yeah?!? Well-- well-- I'm up $100,125.73 this year!* So how about that, huh?!?"

--------------------------------------------------------------------------------------------------------------
Every day I "re-calculate" my retirement asset/income plan (on-line, of course). Does it mean anything? Not really. However, some people read the obit's, some do the crossword puzzle - this is my daily "mental exercise"...

- Ron

 

[Sam]

Did you plan it, or is it just "one of those things" that it's a normal distribution (bell curve) at this time?

No, I did not plan it, but I did expect to see that type of distribution, leaning on the positive side. I'm glad I covered all possible bases this time. When I was typing "21% or more better", I said to myself "yeah, right" But as always, there is at least one exeption to anything.

Since I’ve already FIRE’d, I’m watching all the gyrations on this thread about the ‘right’ way to calculate YTD returns with more than a little amusement. Rather than try to measure my returns with a micrometer and get a precise percentage (and be sure the rest of you aren’t calculating your returns incorrectly, or heaven forbid, cheating )

I find it funny that some members keep insisting that others are incapable of figuring out their ROI. Funnier though, is their insistence that people are reporting higher percentage than actual. Makes me wonder why?

 

[justin]

I find it funny that some members keep insisting that others are incapable of figuring out their ROI. Funnier though, is their insistence that people are reporting higher percentage than actual. Makes me wonder why?

It really is a rather complicated calculation if you want to get an accurate result. I dollar cost average into my portfolio, which means at least 5 or 6 purchases a month. Not always a constant amount though. Then there are profit sharing matches and bonuses that are added at irregular intervals.

I use a method to calculate my rate of return which admittedly has errors but it is simple enough for me to implement without a huge amount of record keeping or data entry. For a given period: (End Bal - contributions during period)/Begin Bal - 1 = rate of return for period. I do it quarterly, so to get an annual return, I multiply (1+Q1%) * (1+Q2%) * (1+Q3%) * (1+Q4%). As the length of time period approaches zero, the error factor gets smaller.

Some folks use Money or Quicken, some use excel XIRR, some use proprietary software, some divide end bal by begin bal.

Some folks exclude the return from their money market/CD investments since those are "cash" and not "investments" according to their definition (and even though the cash/CD allocation may be 20% of their portfolio!). Some lump it in. Some may exclude 401k results. Some may have "special" accounts they exclude for whatever reason.

Some may report results in Canadian $, Japanese Yen, or Euros, not USD denominated.

I've already pointed out that the YTD results I see in the SP500 are different than what you have seen.

 

[Sam]

I've already pointed out that the YTD results I see in the SP500 are different than what you have seen.

Not really. It's the same number. Yours was one day earlier than mine. There was a BIG drop across the board just 2 or 3 days ago.

 

[terminator]

Here's another example to think about in your calculation. Suppose you have $100 and invest January 2006. In the beginning of May 2006, you see things have gone up to $120, so you sell. You buy back in July 2006 and things go up another 10% leaving you with $132.

Your average ROI on your investments individually is 20% on the $100 and 10% on the $120. You could compute a weighted average ROI which gives you 14.5%, but your really got 32% ROI.

The "correct" approach means you use Quicken, MSMoney, the XIRR function in Excel, or other software like PFROI. These all take into buys, sells, reinvested dividends, and time. And even with these programs, we see there are issues with "annualized YTD" versus "current year".

LOL,

Using the calculation I mentioned your example would give me a 34.27% return. To me that makes sense because overall you made $32 on an initial investment of $100 which would be 32% but you did a little better because you didn't deploy your capital in June. The calculation for me would be $32/(($100*(120/365))+($120*(184/365)))=34.27%

Granted this would produce absurd results if you invest $100 for one day and end with $101 and don't count what you do with your capital the other 364 days, but it works great for me because usually I have very little turnover and any short term investments are small enough not to skew the results. On individual stocks it isn't real meaningful, but it seems to work well for an entire portfolio. My biggest issue might be some small gaps in time between a sale and a new purchase. Even if I were selling 4% a year to fund living expenses, I don't think it would greatly skew the results to have 4% of my capital calculated based on a short year since the other 96% would still be deployed for 365 days during the year, more or less.

A fully comprehensive calcualtion would also work in the time my capital is deployed in bonds, the change in bond values, money market accounts, etc. I just do it for stocks because that's the vast majority of my portfolio and I already know how my cash & bonds are doing.

Like brewer said, I get horseshoes close and it works for me. The reason I mentioned it here is that having no real reference to work from it actually took me a while to realize that was a viable method of calculating returns for me so I thought it might help others here if they happen to be struggling with the same issue.