How do I compute year to date returns?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
TomCat96
Posts: 524
Joined: Sun Oct 18, 2015 12:18 pm

How do I compute year to date returns?

How do I exactly calculate year to date returns?
I have searched online for an answer but keep finding websites which conflate the idea of annualized returns with
year to date returns...the amount of gains one has made to date since the beginning of the year.

For instance:

Suppose I have a portfolio of 100K on Jan 1 which grows to 110K by June 15th.
Suppose also that during the year I earn 5k, invest it on march 1st, and sell on April 1st. This investment rises from 5 to 6k.
On March 1st, the portfolio (apart from the 5) is worth 102k. On april 1st, the portfolio is worth 108k.

What is my total YTD return, assuming it is currently June 15th?

arcticpineapplecorp.
Posts: 3219
Joined: Tue Mar 06, 2012 9:22 pm

Re: How do I compute year to date returns?

are you looking for something like this:

http://www.moneychimp.com/features/port ... ulator.htm

it's an investment return calculator. It works I believe by looking at the difference between starting and ending results minus any contributions and adding any withdrawals. That might sound counterintuitive, but if you think about it this was the problem with the Beardstown Ladies. They were calculating their returns but not subtracting out their contributions. So it looked like they were doing better than they really were (their contributions were in large part helping the numbers look so good).

This site (above) mentions this was written about by William Bernstein in the Four Pillars of Investing.

The only problem with this site (above) is that it gives you the annualized return and it doesn't allow you to enter 6.5 months only 6 or 7. So maybe it's not as sophisticated as you want.

Maybe you want to do IRR (internal rate of return)? I'm sure some will chime in here with more sophisticated ways of doing this. Might be more work than you wan to do (or not, if you have excel do it for you). Do a search for IRR to learn more.

Also, I believe Vanguard's site shows you under "performance summary" (if you click "see how we calculate performance") :
Calculation method. Personal performance uses a formula called internal rate of return (IRR), which is a dollar-weighted return. IRR takes into account new money coming into your investment, as well as how long that money has been held. Don't confuse your personal rate of return with those posted for funds and indexes. The returns presented in these instances use a time-weighted calculation, which does not take cash flow into consideration. source: https://personal.vanguard.com/us/conten ... ontent.jsp
The Vanguard's performance summary does do year to date, but I'm not sure you could specify some past dates if you wanted to, just 10 year, 5 year, 3 year and YTD returns from what it appears.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

longinvest
Posts: 2948
Joined: Sat Aug 11, 2012 8:44 am

Re: How do I compute year to date returns?

TomCat96 wrote:
Sat Oct 28, 2017 2:56 pm
How do I exactly calculate year to date returns?
...
Suppose I have a portfolio of 100K on Jan 1 which grows to 110K by June 15th.
Suppose also that during the year I earn 5k, invest it on march 1st, and sell on April 1st. This investment rises from 5 to 6k.
On March 1st, the portfolio (apart from the 5) is worth 102k. On april 1st, the portfolio is worth 108k.

What is my total YTD return, assuming it is currently June 15th?
TomCat96,

You might consider trying to use our wiki's Calculating personal returns calculator (online or downloadable). It calculates portfolio (time-weighted) returns for various periods including year-to-date (YTD) and it also calculates an investor (money-weighted) return for the overall investment period. Returns are only annualized for periods longer than one year. So, the YTD return is not annualized.

The calculator considers contributions/withdrawals on a monthly basis. So, it is not perfectly accurate to the 10th decimal. But, the calculation is good enough for practical purpose.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

David Jay
Posts: 5632
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: How do I compute year to date returns?

How do I compute year to date returns?

I don't.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

inbox788
Posts: 5506
Joined: Thu Mar 15, 2012 5:24 pm

Re: How do I compute year to date returns?

Accurate YTD returns are difficult to calculate, not because of the math, but the accounting. Correctly tracking the dates of additional transactions is too tedious for me, so I don't bother, but I assume the calculations coming out of my brokerage and Vanguard are correct, but limited. I just took a look and while Vanguard provides a total return number, getting sub accounts and particular time periods performance wasn't readily available.
Calculation method. Personal performance uses a formula called internal rate of return (IRR), which is a dollar-weighted return. IRR takes into account new money coming into your investment, as well as how long that money has been held. Don't confuse your personal rate of return with those posted for funds and indexes. The returns presented in these instances use a time-weighted calculation, which does not take cash flow into consideration.
My 401k does let me select time periods, so they're a bit better than Vanguard in reporting. Still, since my portfolio is beginning to mirror the 3 fund portfolio more and more, I'm able to use the fund returns are a decent proxy and not worry about personal return. The only time it might matter is during an extremely volatile year, and only if you contribute or withdraw or rebalance a significant amount.

Oicuryy
Posts: 1246
Joined: Thu Feb 22, 2007 10:29 pm

Re: How do I compute year to date returns?

In your example, "the amount of gains one has made to date since the beginning of the year" is (110000-100000)+(6000-5000) = \$11,000.

Ron
Money is fungible | Abbreviations and Acronyms

TomCat96
Posts: 524
Joined: Sun Oct 18, 2015 12:18 pm

Re: How do I compute year to date returns?

Oicuryy wrote:
Sat Oct 28, 2017 6:59 pm
In your example, "the amount of gains one has made to date since the beginning of the year" is (110000-100000)+(6000-5000) = \$11,000.

Ron

Correct. But what is the YTD return?

Is my return 11%, since I started the year with 100k?

One could say I started with 105k and ended with 116k which would yield a YTD return of 10.476%.
However, I did not in fact start with 105k. I started with 100k.

So does that mean that if a man starts with 100K on Jan 1, earns 10K by Dec 31st, but happens to get paid on December 31st to the tune of 50k, that his YTD earnings is not in fact 10%, but is in fact, 160/ (100+50). Ought the amount of time the money has been in his possession be taken into account when computing the YTD return?

What about the relative portfolio weights? While it's true I started in Jan with 100K? I only came into possession of the 5k in march. Does that mean that my gains should be computed with respect to 100K in Jan? Wouldn't it make more sense to compute the 5K return portion with respect to the value of my portfolio in march which was 102k?

TravelforFun
Posts: 1466
Joined: Tue Dec 04, 2012 11:05 pm

Re: How do I compute year to date returns?

I put the OP's example on a spreadsheet and this is what I got.

On March 1, April 1, and June 15, his annualized returns are: 12.37%, 12.17%, and 11.06%, respectively.

Travelfor Fun

#Cruncher
Posts: 2672
Joined: Fri May 14, 2010 2:33 am
Location: New York City
Contact:

Re: How do I compute year to date returns?

TomCat96 wrote:
Sat Oct 28, 2017 10:45 pm
... But what is the YTD return?
"Return" can be defined in different ways. I like to pose it as follows:
• Assume I make deposits and withdrawals into a savings account on the same dates and in the same amounts as with my investment account.
• Treating the opening balance as a deposit and the ending balance as a withdrawal.
• What interest rate would the savings account need to pay for me to end up with \$0.00?
As calculated with the Excel XIRR function the annual interest rate would need to be 25.83% as shown in cell C6 of the following spreadsheet. As shown in cell C8 this is equivalent to a 10.95% YTD return for the 165 days 1/1/17 to 6/15/17. Columns D and E show the interest and balance in the hypothetical savings account earning interest at the daily rate shown in cell C7.

Code: Select all

``````      Col A   Col B     Col C        Col D       Col E
Deposit/
Row    Date    Days  (Withdrawal)  Interest     Balance
---  --------  ----   ----------   --------   ----------
2  01/01/17           100,000               100,000.00
3  03/01/17    59       5,000    3,783.78   108,783.78
4  04/01/17    31      (6,000)   2,143.65   104,927.44
5  06/15/17    75    (110,000)   5,072.56         0.00

6    Total => 165       25.83%  <= Annual return (XIRR)
7                   0.0629682%  <= Daily return
8                       10.95%  <= 165 day return``````
Sample calculations:

Code: Select all

``````C6: annual  return          25.83% =  XIRR(C2:C5, A2:A5)
C7: daily   return      0.0629682% = (1 + C6) ^ (1 / 365) - 1
C8: 165 day return          10.95% = (1 + C7) ^ B6 - 1
D3: interest 1/1 - 3/1    3,783.78 = E2 * ((1 + C\$7) ^ B3 - 1)
E3: 3/1 balance         108,783.78 = E2 + C3 + D3``````

Oicuryy
Posts: 1246
Joined: Thu Feb 22, 2007 10:29 pm

Re: How do I compute year to date returns?

TomCat96 wrote:
Sat Oct 28, 2017 10:45 pm
Correct. But what is the YTD return?
Do you want the year-to-date amount of return or the year-to-date rate of return?

The YTD amount of return is \$11,000. It would not make much sense to express that amount as a percentage of either 100k or 105k for the reasons you give.

Rate of return is usually expressed in units of percent gain per year. But it can be expressed as percent gain per part of a year.

There are two commonly used ways to calculate a rate of return; time-weighted rate of return and dollar-weighted rate of return. #Cruncher's post above shows how to calculate a dollar-weighted rate of return and express it as percent per part of a year.

The time-weighted rate of return per the year to date period could be calculated as the product of the gains between cash flows.
(102000/100000)*(114000/107000)*(110000/108000)-1 = 10.685%

For info on the difference between time-weighted rate of return and dollar weighted rate of return see these pages from Gummy.
http://www.financialwisdomforum.org/gum ... nd-you.htm
http://www.financialwisdomforum.org/gum ... eturns.htm

Ron
Money is fungible | Abbreviations and Acronyms

venkman
Posts: 698
Joined: Tue Mar 14, 2017 10:33 pm

Re: How do I compute year to date returns?

TomCat96 wrote:
Sat Oct 28, 2017 10:45 pm
Correct. But what is the YTD return?

Is my return 11%, since I started the year with 100k?

One could say I started with 105k and ended with 116k which would yield a YTD return of 10.476%.
However, I did not in fact start with 105k. I started with 100k.

So does that mean that if a man starts with 100K on Jan 1, earns 10K by Dec 31st, but happens to get paid on December 31st to the tune of 50k, that his YTD earnings is not in fact 10%, but is in fact, 160/ (100+50). Ought the amount of time the money has been in his possession be taken into account when computing the YTD return?

What about the relative portfolio weights? While it's true I started in Jan with 100K? I only came into possession of the 5k in march. Does that mean that my gains should be computed with respect to 100K in Jan? Wouldn't it make more sense to compute the 5K return portion with respect to the value of my portfolio in march which was 102k?
You can make a spreadsheet to calculate this relatively easily. (If you're into that sort of thing)

For each contribution (or withdrawal), take the dollar amount and multiply it by the percentage of time it has been in the portfolio. Then sum up all those results, and divide that number by the total return (current PF value minus total of all contributions).

Example: You start a portfolio on Jan 1 with a contribution of \$1,000. You add another \$1,000 at the beginning of each quarter. On Dec. 31, the value of the portfolio is, say, \$4500. The initial \$1,000 was in the PF the entire time, so multiply that by 100%. The Apr 1 contribution was in the PF for 9 out of the 12 months, so multiply that by 75%, etc. If we do this for all 4 contributions we get: 1,000 + 750 + 500 + 250 = \$2500

Total returns were (\$4500 - \$4000) = \$500.

So, in this example, the dollar-weighted return for the year would be 500 / 2500 = 20%.