The Bottom Line: How to Calculate Your Portfolio's Return
The question every investor wants to know is:
How well am I doing?
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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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Discussion
The link to the top portfolio tracking websites has been fixed. Thank you.
posted about 1 year ago by Jean from Illinois
Why not just use TWR (Time-Weighted-Return) calculation instead? There's no need for proxies then.
posted about 1 year ago by Pasi from Illinois
EZROR is a program which accurately calculates internal rate of return. The only inputs required are the portfolio balance values on the begining and ending dates for the period to be calculated and any intervening additions to or withdrawals from the portfolio. A free 10 day trial version may be downloaded from HamiltonSoftware.com or purchased for $59.95.
posted about 1 year ago by Elneta from Colorado
What this article is discussing is making an interest rate adjusted discounted cash flow analysis.
Instead of buying ANY software to do this calculation, there is all kinds of FREE software that will do these kinds of calculations.
A related subject (in a corporate environment) is the capital budgeting decision process. It's kind of the same thing from a reverse point of view. In capital budgeting, one spends money now to generate future anticipated cash flows which get interest rate adjusted back to a net present value.
Microsoft Excel (as part of the Microsoft office product) has a TON of financial routines (functions) that do this kind of analysis. Again, we are talking free.
If you have ANY OTHER office product (including Word Perfect), I am sure those products all have the same basic functionality - including the "open source" (free) software available on the web (if you are NOT inclined to pay for any office product).
Happy Trails.
posted about 1 year ago by James from Georgia
