The Bottom Line: How to Calculate Your Portfolio's Return

The question every investor wants to know is:

How well am I doing?

Although some people are satisfied simply watching the dollars grow, most investors want that translated into a performance figure.

Bragging rights aside, there is good reason to determine your own portfolio’s performance: Measuring the performance of your total portfolio is useful to see if the long-term terminal value that you hope to achieve with your investment program is realistic.

In general, you should be examining the return on your portfolio to make sure it is within the target range you expected, based on the investment mix you have settled upon. If it isn’t, you may need to make some adjustments, switching out of underperforming (relative to peers) segments of your portfolio, or you may need to make changes in your future projections—for instance, you may have to increase your savings rate, you may have to take on more risk to achieve the target that you set, or you may simply have to adjust your target value downward, settling for less in the future.

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