Real Time Gain vs CAGR

[JackJester]

Forgive me, I dropped ECON 101 in college when it was an 8AM class and never rescheduled it. Question: I have been investing in my after tax Schwab account for 5.25 years. When I look at my account summary on the Schwab website it says the Real Time Total Gain/Loss is +9.47%. However, I have also been recording all my buys/sells in Excel and compare it to the current Market Value reported by Schwab. I then calculate my CAGR to be +3.21%. Schwab has this footnote: “The Real Time Gain/Loss calculation is a record of your estimated daily gains or losses and does not include all the adjustments that may be necessary for purposes of computing your tax gains or losses or for reporting these gains or losses on your tax return, and are not binding on the IRS." I'm pretty sure I'm calculating CAGR correctly ... seems like a no brainer from Investopedia: https://www.investopedia.com/terms/c/cagr.asp



So, my question is, why would Total Gain be so much different (higher) at 9.47% than my CAGR of 3.21%? I assumed the 2 were one in the same. Also, I have very little cash in the account that could have swayed the result. And, I reinvest all my dividends and CGs.

 

[pb4uski]

Dunno... I've never heard of Real Time Total Gain/Loss. Sounds like Schwab voodoo.

I use IRR and most of the rest of the world does.

 

[target2019]

Look for Portfolio Performance. There is a line called Portfolio Return. Those numbers may be closer to your CAGR.

 

[SecondCor521]

Dunno... I've never heard of Real Time Total Gain/Loss. Sounds like Schwab voodoo.

I use IRR and most of the rest of the world does.

+1

 

[NW-Bound]

There's nothing wrong with the way you compute CAGR, if there's no deposit or withdrawal from the account. Else, the more complicated IRR method is needed.

Then, why is Schwab's number off and so much higher? I believe it is because Schwab's number is not annualized, and represents the total gain since Day 1.

If so, then it still does not match, because now it is too low compared to your CAGR.

( 1 + 0.0321 ) ^ 5.25 = 1.1804, which means a gain of 18.04% vs. Schwab's 9.47%.

Looking at what you noted, I think I may have the answer.

... Schwab has this footnote: “The Real Time Gain/Loss calculation is a record of your estimated daily gains or losses and does not include all the adjustments that may be necessary for purposes of computing your tax gains or losses or for reporting these gains or losses on your tax return, and are not binding on the IRS." ...

It looks like Schwab's intention is to show you the tax liability if you liquidate everything right now. You would owe tax on 9.47% of the total proceed, not the whole 18.04%. The difference of 8.57% must have been paid-out dividends over the years and reinvested. Those dividends had already been reported each year end in the past, and any taxes already paid. So, Schwab excludes that.

 

[OldShooter]

Ask Schwab? (800) 435-9050 cust svc #3