Gattamelata wrote:Please do not read any livesoft post without first reading every other livesoft post.
Logically, of course, the only way to satisfy this request is to never read a livesoft post.
Gattamelata wrote:Please do not read any livesoft post without first reading every other livesoft post.
letsgobobby wrote:Without a calculator, you had $24080 and now have about $24240+about $240=$24480. Return is the difference of $400/$24080 or 1.66%
livesoft wrote:letsgobobby wrote:Without a calculator, you had $24080 and now have about $24240+about $240=$24480. Return is the difference of $400/$24080 or 1.66%
And with your XIRR spreadsheet, what answer do you get? Is it different? The same? This exercise is a control of your spreadsheet and your calculator.
letsgobobby wrote:livesoft wrote:letsgobobby wrote:Without a calculator, you had $24080 and now have about $24240+about $240=$24480. Return is the difference of $400/$24080 or 1.66%
And with your XIRR spreadsheet, what answer do you get? Is it different? The same? This exercise is a control of your spreadsheet and your calculator.
oh, phew. I thought it was a control of my mind.
calculator says 1.65%
XIRR says 3.36%; I would calculate the YTD return as follows (1.0336)^.5= 1.67%
alternatively, use 12/31/15 for the ending date rather than 6/30/15, and get 1.65%.
longinvest wrote:XIRR calculates an internal rate of return. Other names for it are money-weighted return and investor return. This rate of return is not comparable to the return of an index.*
* It usually doesn't make much sense to look at the internal rate of return during sub-periods (like YTD), as it is uncomparable. It is best to look at this investor return over the entire investment history, to see how the investor has been doing overall.
What one usually wants to calculate, for YTD, is a portfolio return. Other names for it are time-weighted return and comparable return. This rate of return is comparable to the YTD return of an index.
Investor and portfolio returns can significantly differ (depending on the specific timing of contributions and withdrawals). So, the distinction between them cannot be dismissed as unimportant.
In a thread like this one, I would think that it would be more appropriate to report YTD portfolio return (time-weighted return).
letsgobobby wrote:Now you are trying to play with my mind...
What does it say about XIRR? It says use 12/31, or calculate your YTD return at the halfway point by using 6/30 and then adjusting with the method I showed.
My YTD is 3.88-4.00%, depending on precisely which date I use (I am using 1/5/15 because that's the date for which I have a year end 2014 total). So I think that's right. I have 10% VSS and 28% Total International so that probably helped.
DR wrote:I'm confused by this post. One can use XIRR to calculate a weighted return, YTD, on one's portfolio. One can certainly get an internal rate of return (XIRR) on a portfolio. I guess I'm just confused by the point you are making about comparing to the return on an index. I must be missing something.
livesoft wrote:You are entertaining me and I like it.
By starting on 1/5/15, you have removed the 1% drop in the markets in the first few days of the year. This automatically makes your portfolio performance 1% better than others who reported portfolio performance starting on 1/1/2015.
letsgobobby wrote:Excellent point. I shall have to cut short by one week my next 10th anniversary cruise in order to accurately calculate my YTD returns for your approval.
livesoft wrote:letsgobobby wrote:Excellent point. I shall have to cut short by one week my next 10th anniversary cruise in order to accurately calculate my YTD returns for your approval.
I think that's only true if you shred your year-end statements or delete them from your online accounts without reading them.
longinvest wrote:DR wrote:I'm confused by this post. One can use XIRR to calculate a weighted return, YTD, on one's portfolio. One can certainly get an internal rate of return (XIRR) on a portfolio. I guess I'm just confused by the point you are making about comparing to the return on an index. I must be missing something.
Here's an extreme example just to illustrate the difference between XIRR and portfolio returns, and comparing them to an index.
- I invest $1,000 in security A.
- One year later, security A loses half of its value. Portfolio value: $500.
- At that point, I invest an additional $1,000 in security A . Portfolio value: $1,500.
- One year later, Security A recovers its initial value. Portfolio value: $3,000.
XIRR answers the question: Had I put my contributions into a savings account (on the same dates), instead of into security A, what annual interest rate would have been needed so that I end up with $3,000 at the end of the second year? The answer is: a bit more than 30%. So, XIRR will report this number*.
* To check this: After one year, $1,000 grows (at 30%) to $1,300. After contribution, that's $2,300. After another year, this grows (at 30%) to $2,990 (almost $3,000).
Yet, you and me know very well that the return of A, over 2 years, was 0%; it lost half of its value in the first year and recovered it in the second. Had I lump invested $2,000 in A and let it ride for 2 years, the final value would have been $2,000.
So, which of 30% or 0% is the valid return? It depends what you want to talk about!
If you want to compare A to the S&P 500, you'll say that the return was an annualized 0% over the 2-year period. If you want to describe the growth of the investor's money, it was an annualized 30% growth, but you have to understand that this impressive growth was simply due to the timing luck of the contributions.
Another investor investing his money in A over the exact same period, but making different contributions on different dates would have most probably got a completely different investor return (XIRR). But, he would have got the exact same portfolio return. As both investors had identical portfolios, it makes sense for their comparable returns to be identical. That's what the portfolio return gives you.
letsgobobby wrote: Isn't the spreadsheet supposed to make my life easier?
stemikger wrote:5.04% YTD as of June 2015
60% - Vanguard Institutional Index Fund
40% - Blackrock U.S. Debt Index Fund
livesoft wrote:letsgobobby wrote: Isn't the spreadsheet supposed to make my life easier?
I don't know because I don't do spreadsheets.
livesoft wrote:Next time I'm in Hawaii, I will take you to Roy's and show you how to use MS Money to do these calculations. Of course, you will have to get there, too.
livesoft wrote:Let's try an experiment.
Suppose one bought 1000 shares of a fund on December 31, 2014 that closed at $24.08 a share. And then one made no other purchases through 6/30/2015 from the outside, but one did reinvest the dividend of $241 (0.241 per share) on 6/26 at $24.52 a share, and the fund closed at $24.24 a share on 6/30/2015.
What would one's YTD return to 6/30/2015 be?
DR wrote:It seems that you are just explaining what an internal rate of return means. I get that. You can use the XIRR function to figure both YTD or the annualized return depending on how you build the formula in Excel (i.e., whether your use 365 days or the number of days YTD). You can also use XIRR function to give an annualized return over several years. If you have a portfolio of 10 different positions, you can also use XIRR to figure out the YTD or annualized return (either one) on that entire portfolio. It sounds like you may be using the term portfolio in a different way than I was.
Kevin M wrote:Interestingly, if one does not reinvest the dividend, using calculation method 2 but including the dividend as a positive cash flow on 6/26/2015, and using the final value of $24,240 (1000 * 24.24) on 12/31/2015, you get a value of 1.674%. I believe it's higher because the mid-year dividend cash flow has a larger present value than if included in the terminal value on 12/31/2015.
livesoft wrote:Kevin M wrote:Interestingly, if one does not reinvest the dividend, using calculation method 2 but including the dividend as a positive cash flow on 6/26/2015, and using the final value of $24,240 (1000 * 24.24) on 12/31/2015, you get a value of 1.674%. I believe it's higher because the mid-year dividend cash flow has a larger present value than if included in the terminal value on 12/31/2015.
The shares purchased with the dividend lost money because they were purchased at a higher price than the closing NAV on 6/30/2015.
livesoft wrote:If an investment loses money, then the return is lower. I can understand losing money, but I don't know what "larger present value" means in this case.
longinvest wrote:DR wrote:It seems that you are just explaining what an internal rate of return means. I get that. You can use the XIRR function to figure both YTD or the annualized return depending on how you build the formula in Excel (i.e., whether your use 365 days or the number of days YTD). You can also use XIRR function to give an annualized return over several years. If you have a portfolio of 10 different positions, you can also use XIRR to figure out the YTD or annualized return (either one) on that entire portfolio. It sounds like you may be using the term portfolio in a different way than I was.
In my vocabulary:Is that clearer?
- XIRR = investor return = money-weighted return
- comparable return = portfolio return = time-weighted return
I use the same idea as in studies comparing "investor returns" to "fund returns".
Do you have more intuitive names to suggest?
livesoft wrote:stemikger wrote:5.04% YTD as of June 2015
60% - Vanguard Institutional Index Fund
40% - Blackrock U.S. Debt Index Fund
This is another possible case of weird math. The first fund has returned about 1.23% and the second fund has returned about -0.2% for the 6 months of the year. How one could get 5+% out of those two funds is only possible with phenomenal market timing.
OK, contributions could have made one's portfolio 5% larger, but that is not return on investment.
bayview wrote:In other words, with the returns I posted earlier (3.67% investor return; 1.84% portfolio return), the investor return projects what my return for the year would be if not a single, solitary thing changed over the next six months. Which seems pretty dang unlikely.
I will think of portfolio return as "where I actually am so far" and investor return (XIRR) as "who knows, at the rate I'm going, maybe I'll be here after twelve months."
stemikger wrote:livesoft wrote:stemikger wrote:5.04% YTD as of June 2015
60% - Vanguard Institutional Index Fund
40% - Blackrock U.S. Debt Index Fund
This is another possible case of weird math. The first fund has returned about 1.23% and the second fund has returned about -0.2% for the 6 months of the year. How one could get 5+% out of those two funds is only possible with phenomenal market timing.
OK, contributions could have made one's portfolio 5% larger, but that is not return on investment.
Guilty as charged (phenomenal market timing). What can I say I got lucky. Pure luck and I know it won't happen again. Slow and steady at 60/40.
longinvest wrote:The wiki's spreadsheet investor return (XIRR) was never meant to be used for predicting anything about the future; it was designed to give the overall investor return over the complete investment history (which, for most users, is longer than 11 months).
For laziness reasons, the spreadsheet currently computes an annualized investor return, regardless of history length, even when history length is 11 months or less. Usually, for periods of less than one year, it should report cumulative returns (not annualized); this would have required putting conditions in the spreadsheet formulas, and I didn't get do it yet.
I'll fix it.
bayview wrote:longinvest wrote:For laziness reasons, the spreadsheet currently computes an annualized investor return, regardless of history length, even when history length is 11 months or less. Usually, for periods of less than one year, it should report cumulative returns (not annualized); this would have required putting conditions in the spreadsheet formulas, and I didn't get do it yet.
I'll fix it.
I hope you don't, if you haven't already. I was just thinking out loud. It makes perfect sense as it is, with the explanation.
vitaflo wrote:pennstater2005 wrote:
For me, on the "my home" page you can see the personal performance graph. Underneath it, it says "performance details". I just clicked on that and then onto "investment prices and returns" and there are all the returns of my fund(s) including: YTD and 1,3,5 and 10 year returns.
Those are the returns for the individual funds, that's not the return of your own portfolio.
Those pay out about 2.8% yearly in dividends. It takes some of the sting out.oc4boxer wrote:My YTD is down roughly 2%. International index and total bond index are sapping me.
Bacchus01 wrote:About 9.5% now.
YTD would be total portfolio return so a fund-of-funds figures that out every trading day.pennstater2005 wrote:I have a Lifestrategy fund. It doesn't show individual fund returns.
grap0013 wrote:Bacchus01 wrote:About 9.5% now.
You have to show all holdings with documented transactions if you are going to claim those mighty returns. Otherwise, it looks like Beardstown Ladies math. I'm joking but not really!