Deciphering Morningstar Performance View

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Deciphering Morningstar Performance View

Post by Offshore »

Morningstar's free portfolio manager has a tab to "My Performance".

Using that link one can see their portfolio's "Total Return", "Personnal Return" and "Index Return". The index they use is the U.S. Market Index.

I haven't added or withdrawn funds from the portfolio ytd., however, I did my annual rebalancing in April. The the total return is about half of the personnal return.

The personnal return has beat the index (Morningstar U.S. Market), and the total return has lagged the same index.

I don't understand how to interpret this information.
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Post by pkcrafter »

I've never used the portfolio manager, but if you haven't seen this, it might help. ... Learn.html

When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Post by InvestingMom »

Essentially because you rebalanced in April you may have increased your personal returns.

If you are looking at say one investment such as the index fund for the total stock market, the "total return" is the return since Jan 1. Your "personal return" for that same fund might be higher if you added to the fund this year in April. Remember that the stock market tanked in January and Feb (maybe March also...I didn't go back and look, but it was very grim in the first few months of the year,) and so if you added to it in April through re-balancing, your personal return could be much higher than what the fund says its total return is for 2009. This all works the same for a portfolio of funds.

Bottom line is that the returns since April 2009 have been much higher than the returns since Jan 1, 2009 so if you invested more in stocks in April you boosted your personal returns.

I assume the total returns are lagging the index because all funds have some fees and are not perfect anyway.

That all being said, i am not sure how Morningstar does their calculations. Vanguard also calculates your personal returns and so if you use them, it would be worth checking morningstar against Vanguard.

PKcrafter, I followed your link but it went to the log on page.

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Post by taichifan »

Log in and you will go automatically to the page that explains performance.
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