how to calculate annualized ROI for my 3 fund portfolio

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Topic Author
multiplydollar
Posts: 14
Joined: Fri Jan 30, 2015 6:49 pm

how to calculate annualized ROI for my 3 fund portfolio

Post by multiplydollar »

Hi all,
I wanted to find how to calculate annualized  ROI for my below portfolio. Any help would be appreciated. Thanks in advance.

I have a 3 fund portfolio that i contribute monthly starting 2015.  AA at the beginning was 60/20/20  with US/International/Bond funds.  Currently, AA is 58/18/24 based on cost basis as of 03/31/2020. I rebalanced  the portfolio twice or thrice during the 5 years. This is a VA 529 account and as the kid gets older, i am moving towards lesser stock and more bonds. I am planning to have the AA at  50/15/35 next year. But i want to calculate the  performance of the funds/portfolio. The VA 529 website only provides total growth in its statements. 

When i check the performance for the entire period for these funds as of 03/31/2020, the website says the total growth is 18%/32%/1% for US/International/Bond funds.

1. How to get annualized ROI for individual funds?
Can i get the annualized ROI for individual funds by dividing the total growth by the number of years?
Then i get 3.6%/6.4/0.2%.  

2. How to get ROI for the entire portfolio?
 Can i get the ROI for the entire portfolio by multiplying the total growth(%) with the weighted average of the current cost basis?
18% x (0.24) + 32 x (0.58) + 1% x (0.18)
Then i get 23%. 

Any help would be appreciated. Thanks in advance.
pshonore
Posts: 6883
Joined: Sun Jun 28, 2009 2:21 pm

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by pshonore »

Familiar with Excel? Use the XIRR function. Build a simple spreadsheet with a column for dates and and a corresponing column for contributions, withdrawals, etc. If dividends are reinvested you can ignore them since they will be reflected in your totals.

Here's a link to a detailed article by another Board member.
https://www.whitecoatinvestor.com/how-t ... r-function
livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by livesoft »

Not familiar with Excel, but have a Windows computer? Then download the free Microsoft Money and enter all your transactions. Then run any and all kinds of reports to your heart's content over any dates you want (as long as you have entered prices for your assets for the start and end dates).
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Topic Author
multiplydollar
Posts: 14
Joined: Fri Jan 30, 2015 6:49 pm

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by multiplydollar »

Thanks livesoft & pshonore.
I looked into XIRR() in excel and downloaded my transactions for a single fund(VSMPX) and compared its performance calculation with the VA 529 statement. They are different.

XIRR() returns 23% while VA 529 statement says the performance for the same set of transactions as 30%.

I talked with VA 529 customer care and they are not able to help me with how they calculate performance for my particular portfolio/statement. They are only taking me to the VA 529 page where the performance charts for the generic fund.

Can you guys match the calculated performance with the fund provided performance? Then only, we can assume what we have is accurate, right?
retired@50
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Location: Living in the U.S.A.

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by retired@50 »

The difference in performance may have to do with the methods being used and whether additional contributions are being considered.

In some cases, performance shown on a web page just assumes an initial deposit, and any subsequent dividends. Sort of like those "Growth of $10,000" charts you sometimes see at Vanguard or Fidelity.

For your "personal" performance, your cash flows into the account can complicate the math, so depending on the provider, they may ignore it.

You might ask the VA 529 rep. if subsequent cash flows are being considered or not?

Regards,
This is one person's opinion. Nothing more.
pshonore
Posts: 6883
Joined: Sun Jun 28, 2009 2:21 pm

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by pshonore »

Did you reinvest dividends? If yes, then they should be reflected in your ending balances. If not, where did they go? To a cash account, etc? All inflows and outflows should be reflected in your detail entries. Rebalancing would not be a factor in any discrepency as long as its reflected in the totals.
Topic Author
multiplydollar
Posts: 14
Joined: Fri Jan 30, 2015 6:49 pm

Re: how to calculate annualized ROI for my 3 fund portfolio

Post by multiplydollar »

*retired@50 - The VA529 rep was not very helpful. They tried their best to clarify but pointing me towards the generic performance chart in their website.

*pshonore - VA 529 funds don't provide dividends separately. They are invested back into their respective funds. So maybe the VA 529 website takes into this account as well and that why the performance from the website is more?

I checked twice to make sure that i catch up all the contributions and the dates correctly and it looks good. I verified by checking the cost basis in the excel sheet with the VA 529 website as well.

Since the fund i am considering is total US stock index (VSMPX) and it provides roughly 2% dividend, do you think this may be the reason for the difference in performance?

XIRR() returns 23% while VA529 website says 30% over a period of 5 yrs with regular monthly contributions
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