Understanding Personal Performance

[Rianne]

Showing my ignorance here, trying to understand long-term personal performance.

We haven't shifted very much in our taxable stock market index portfolio in the last 10 years, except recently in 2022 we sold bond funds to create a CD/treasury ladder.

If I look at the 10 year performances in the taxable index part (very little movement from us) an example:
10-year +7.4%
5-yr +6.6%
3-yr +8.6%
1-yr -9.3%

For an average, I'd add all the %s and divide by 10. How would I get the overall real rate of return for 10 years, not counting YTD?

 

[braumeister]

You probably want to see your compound annual growth rate. Here's a calculator for that:
https://cagrcalculator.net

 

[Rianne]

Wow. So if I take the total portfolio (retirement + nonretirement) before any deposits on 12/2022, I get the CAGR of 12.43%.

Edit: All dividends were reinvested the entire time.

Edit: of course, the dates are different within the year, but the years are accurate.

 

[oldtimer]

Wow. So if I take the total portfolio (retirement + nonretirement) before any deposits on 12/2022, I get the CAGR of 12.43%.

Edit: All dividends were reinvested the entire time.

Edit: of course, the dates are different within the year, but the years are accurate.

Did you account for new money contributions from your paycheck and employee match? Those portfolio increases should be not be considered as gains as one would with reinvested dividends.


I use this Calculating Personal Returns spreadsheet for tracking our portfolio performance.

 

[pb4uski]

Showing my ignorance here, trying to understand long-term personal performance.

We haven't shifted very much in our taxable stock market index portfolio in the last 10 years, except recently in 2022 we sold bond funds to create a CD/treasury ladder.

If I look at the 10 year performances in the taxable index part (very little movement from us) an example:
10-year +7.4%
5-yr +6.6%
3-yr +8.6%
1-yr -9.3%

For an average, I'd add all the %s and divide by 10. How would I get the overall real rate of return for 10 years, not counting YTD?

I use XIRR. So for 10 years ended 12/31/2022, I would take the value at 12/31/2012 as a negative and the value as of 12/31/2022 as a positive and then calculate an XIRR using the cash flows and the dates.

If you made contributions and withdrawals from the account then include those as additional rows with contributions as a negative and withdrawals as a positiive. No need to consider any transactions that stayed within the account... just contributions and withdrawals with the beginning value as a contribution and the ending value as a withdrawal.

 

[VanWinkle]

I use this one from Moneychimp which allows for withdrawals and additions. It is not perfect, but a pretty good estimate.





Investment Return Calculator: Measure your Portfolio's Performance


VW

 

[Exchme]

Not 100% sure I did this right, but it makes sense in my head.

I recorded the date and amount of each addition or withdrawal. For the initial balance and each transaction, I calculate the days in the past and the $ of that transaction*days in the past. The sum of the $*days divided by the sum of the contributions & withdrawals gets me an average balance.

The difference between the current balance and the contribution & withdrawals gets me the total return.

The CAGR = LN(1+ total return/average balance) / Total Time

Note LN is the natural logarithm.

 

[pb4uski]

I think XiRR would be easier.

 

[NW-Bound]

I use this one from Moneychimp which allows for withdrawals and additions. It is not perfect, but a pretty good estimate.

Investment Return Calculator: Measure your Portfolio's Performance

VW

I learned about the simple Moneychimp formula from sengsational on this forum.

Then, thanks to levindb, I learned that this formula was actually known as the "simple Dietz method".

See this old thread here: https://www.early-retirement.org/fo...e-your-stock-performance-vs-sp500-113976.html

 

[Rianne]

I learned about the simple Moneychimp formula from sengsational on this forum.

Then, thanks to levindb, I learned that this formula was actually known as the "simple Dietz method".

See this old thread here: https://www.early-retirement.org/fo...e-your-stock-performance-vs-sp500-113976.html

Thanks, I missed that thread.

 

[marko]

If you're with TRPrice or Fido (and maybe others), they have your personal rate of return all calculated for you.

It includes not only your withdrawals and gains, but also when you made those changes all figured in. I've found their numbers somewhat different from mine as they include gains/losses based on the timing.