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Best way to track total return?
Kevin Crane
Posted: 10 May 2018 21:25:34(UTC)
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Sorry, this is another "what does everyone else do" question :-(

I want to manage my portfolio of ETFs, ITs and funds by tracking total return. I use HL as my platform. I don't churn my investments very much, a handful of changes each year.

Last year I did it by downloading data for selected date ranges from HL and combining capital and income figures sorted by each investment. It was do'able but clumsy.

I looked for a Windows, web, Android or IOS app which would let me enter my investments, then my historic holdings (date, units, price). I expected to find one that looked up the history of prices and dividends for a selected date range and then gave me my list of investments with capital changes, dividends = total return.

I can't find it, So hence the question, how do you track total return?

King Lodos
Posted: 11 May 2018 00:43:58(UTC)
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I've mentioned the (near) impossibility of doing this when you're likely to move money in and/or out of investments.

A 'time-weighted' return is what most platforms use, and simply demonstrates your fund/stock picking .. A 'dollar-weighted' return is less commonly used, but is much more impacted by market timing (and arguably more relevant to what we actually make).

But neither is without substantial flaws .. So the only way I'd say is relevant to a private investor is to simply calculate the total value of your assets regularly .. It means cash in the bank, money you make on eBay, and your choice of toilet paper, all have an effect on your returns .. But it's very hard to argue with simply being worth more .. Whereas a percentage return could mask big mistakes, and won't necessarily line up with how much wealthier you're getting
2 users thanked King Lodos for this post.
Kevin Crane on 11/05/2018(UTC), Alan M on 16/05/2018(UTC)
TJL
Posted: 11 May 2018 04:40:47(UTC)
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I couldn't be bothered to go into so much detail (although I respect your wish to do so).
And as KL says, it's complicated.
In the past I did spend more time on it but decided it was not worth the effort and that there were better things to spend my time on.
I maintain a couple of spreadsheets so that I can keep an eye on how much we have invested where which I update periodically, but otherwise all l need to know is how much money there is in the bank (i.e. that there is enough), and the total value of my investments on any date compared to any other date with any big deposits or withdrawals included in the calculation so that the result is realistic.
I appreciate that my approach may not be sufficient for you or others.
I don't factor in how much toilet paper we use or how much it costs.
3 users thanked TJL for this post.
Kevin Crane on 11/05/2018(UTC), Fell Walker on 11/05/2018(UTC), A M on 16/05/2018(UTC)
Kevin Crane
Posted: 11 May 2018 07:19:48(UTC)
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Thanks both.

I do exactly as you say, I have a spreadsheet with the actual or estimated value of any significant assets (cash, investments, businesses, properties), which includes depreciating ones (cars, boat etc) and I occasionally look at whether I am worth more or less than I was. My overall aim is to erode my assets slowly enough that some of them will outlive me.

I do worry about toilet paper in an more existential sense, does it exist or not? If yes, exit routine, if no, blame random family member.

Being a simple soul and being willing to risk seeming foolish (πŸ˜‰) I assumed that all the data was available for an app to do the calculation: on X date the stock was worth A, on Y date it was worth B. Difference is B minus A = change in capital value. Between X date and Y date the stock would have received C dividends. Change in capital value plus dividends = total return.

The desire to know total return is to compare the performance of my investments, accepting that looking backwards can lead to walking into lamposts :-)
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King Lodos on 11/05/2018(UTC)
Keith Cobby
Posted: 11 May 2018 08:33:00(UTC)
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I track mine on an overall basis by taking the value at period end, subtracting any new money added during the period, and dividing by the value of the prior period.

For individual performance I keep a watch list on the AIC site and the most important metric to me is the share price total return over 1,3,5,10 years.
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Kevin Crane on 11/05/2018(UTC)
Kevin Crane
Posted: 11 May 2018 08:49:07(UTC)
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Keith Cobby;62104 wrote:
For individual performance I keep a watch list on the AIC site and the most important metric to me is the share price total return over 1,3,5,10 years.


Does "share price total return" mean it includes dividends?
Tom Mozy
Posted: 11 May 2018 09:12:20(UTC)
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You need to run your portfolio/assets/debt (net wealth) as an OEIC.

Record in a spreadsheet its value on a daily/weekly/monthly basis.

Give yourself 1000 shares.

So if you have £50k your share price is £50 per share

When a £400 dividend comes in the share price becomes £50.40

When you add £5000 in new money you add shares at the current value. 5000/50.40 = 99.2063 shares.

So total shares now 1099.2063 and value £55400 = £50.40.

Destroy shares when you withdraw month. Note all contribtions in and out of the portfolio not just the share creation and destruction.

You can then work out the IIR of any contribtion using the IIR excel function.

You can base your share price against any benchmark.

I love adding money when my portfolio price per share dips. I buy more shares in my own portfolio :)
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Kevin Crane on 11/05/2018(UTC), Tim D on 11/05/2018(UTC)
Keith Cobby
Posted: 11 May 2018 09:29:00(UTC)
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Kevin Crane;62106 wrote:
Keith Cobby;62104 wrote:
For individual performance I keep a watch list on the AIC site and the most important metric to me is the share price total return over 1,3,5,10 years.


Does "share price total return" mean it includes dividends?


Yes, the AIC show a variety of statistics but SPTR is the best overall measurement of performance.
King Lodos
Posted: 11 May 2018 14:11:40(UTC)
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Kevin Crane;62098 wrote:
Thanks both.

I do exactly as you say, I have a spreadsheet with the actual or estimated value of any significant assets (cash, investments, businesses, properties), which includes depreciating ones (cars, boat etc) and I occasionally look at whether I am worth more or less than I was. My overall aim is to erode my assets slowly enough that some of them will outlive me.

I do worry about toilet paper in an more existential sense, does it exist or not? If yes, exit routine, if no, blame random family member.

Being a simple soul and being willing to risk seeming foolish (πŸ˜‰) I assumed that all the data was available for an app to do the calculation: on X date the stock was worth A, on Y date it was worth B. Difference is B minus A = change in capital value. Between X date and Y date the stock would have received C dividends. Change in capital value plus dividends = total return.

The desire to know total return is to compare the performance of my investments, accepting that looking backwards can lead to walking into lamposts :-)


Trustnet charting is useful for tracking total return (sometimes back to the 80s) for funds, trusts and UK stocks:

https://www2.trustnet.com/Tools/Charting.aspx

But of course if you're adding and subtracting from holdings, that's where a percentage gain becomes difficult .. There's a strong tendency for retail investors to buy and sell at the wrong times – which means even active funds that have great records tend to underperform the market when you take inflows and outflows into account.

Dalbar did a study showing average fund investors only returned about 2% a year (using data from the funds themselves), and something like 1.5% a year if you go back to the 80s .. But most investors think they track or beat the market – so there's a big disconnect between what ppl think they make vs what they actually make.

I do dollar-weighted returns as well as calculating net worth, and it makes me much more conscious of bad timing.

The way you do it is just subtract and add equally from both sides:

– So if my fund is on £150 and my original investment was £100, that's a 50% return;

– If I then add £100 to the holding, it becomes £250 from an investment of £200, which takes the percentage gain down to 25%.

– Then I take £150 out of the holding, subtract £150 from each side, £100 and £50, and that takes it to a 100% return.


So not much use for comparing yourself to other people, but it factors timing into returns.

Then (from personal experience) you become much more conscious of timing decisions, but selling has a bigger payoff than buying (much nicer to sit on a 100% return than a 50% return) .. so calculating Net Worth alongside dollar-weighted return works best for me .. If net worth is increasing too slowly I can see that I need to deploy more capital .. That had a huge impact on the way I invest
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Kevin Crane on 11/05/2018(UTC)
Kevin Crane
Posted: 11 May 2018 14:28:30(UTC)
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King Lodos;62131 wrote:


– Then I take £150 out of the holding, subtract £150 from each side, £100 and £50, and that takes it to a 100% return.


I followed you up to that point, what is each side? Thanks.
citymoke
Posted: 11 May 2018 15:33:48(UTC)
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I look at it very simply ....

....I look at what the fund/stock is worth now PLUS all dividends received since the original purchase, MINUS what I originally paid into the fund/stock etc., and MINUS any further investments into that particular fund/stock irrespective of WHEN I added to the fund/stock (if I've added to it since first opening).

As long as the resulting figure is positive, then I'm happy with that!

I suppose if I wanted to be REALLY clever, then I should subtract inflation to the final figure, but with low inflation rates, it's neither here nor there if the investment period is not that long.
King Lodos
Posted: 11 May 2018 16:32:38(UTC)
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Kevin Crane;62132 wrote:
King Lodos;62131 wrote:


– Then I take £150 out of the holding, subtract £150 from each side, £100 and £50, and that takes it to a 100% return.


I followed you up to that point, what is each side? Thanks.


If you've got a spreadsheet, with the current value of the asset in one cell, and your initial outlay in the next one .. e.g. it's worth £150 now, and your original investment was £100.

In practice, the current value is usually coming straight from your fund platform – so doesn't need adjusting – so you just add and subtract directly from the outlay cell.

I put £100 into a fund, it goes up 50%, to £150 .. I then take the original £100 out – so subtract that from the initial outlay, leaving 0 .. With a 'dollar-weighted' return, you'd be in pure profit .. £50 return with no outlay .. Which would probably give you an ERROR, cannot divide by zero (in the gain formula), or effectively infinite profit .. But then you have columns in a spreadsheet, and sum the value of investments in one column against the outlays in the next, and do the same there, and the maths works.

It's not the easiest thing to explain ..

But I think it's important to consider the maths and work out why this is an issue .. If there's an underlying reason most retail investors do so poorly (spend decades in stocks and do worse than they would've in savings accounts) it's exemplified by this kind of problem
2 users thanked King Lodos for this post.
Trudy Scrumptious on 11/05/2018(UTC), Kevin Crane on 11/05/2018(UTC)
stephen williams
Posted: 11 May 2018 17:40:36(UTC)
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i use a program called stockmarketeye.com does what you want. very easy to use but it does cost $99
steve
Kevin Crane
Posted: 11 May 2018 19:13:52(UTC)
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Darn, I am now intrigued why I don't understand why you are doing that and what it achieves, so I will have to read up on dollar (pound) weighted returns. There is another evening gone πŸ™‚

Thanks KL
Stephen B.
Posted: 11 May 2018 20:00:52(UTC)
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I think the basic question is what you're trying to analyse, and how accurately you need to know it. If you're trying to assess your individual investments then if you don't trade a lot it's fairly simple, just take the price performance over the time you've held it, turn that into an annual return and add the yield - that may not be exactly right but unless the yield is huge it's good enough. Of course what you do with the information is another matter - with hindsight it's always easy to see which things have been a bad investment, the question is whether you could have known it at the time you bought. Also that may not mean much if you try to compare investments bought at very different times.

If you trade actively and want to assess the performance of your trading strategy that's a whole different kettle of fish - since I don't do that I haven't really thought about it, and I'd expect that getting any meaningful information would be a lot of work.

Finally you can assess your whole portfolio return. What I do is mark to market at the end of each month, pushing any transactions to the nearest month-end - not entirely right but good enough. Then I daisy-chain all the monthly returns. For income I basically add in my total cash assets and net out any non-investment flows over the month, which effectively adds in dividends to get a total return. I'm not really interested in knowing that with any great precision, I just want to see that it looks reasonable given general market returns.
Long Gone Expat
Posted: 15 May 2018 16:09:50(UTC)
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I think you will find the My Portfolio too in FT.com will do and keep it updated this for you.
hooligan
Posted: 15 May 2018 17:02:01(UTC)
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An accurate return will always be CMV - OMV / OMV.
you will get something like 1.1534. if you want the percentage return, just take 1 off that fraction and multiply by 100. so the return in this case 15.34%
cash flows are what distorts the return, especially when they are above 5% of OMV (I hope you can work out that C = closing and O = opening, with MV = Market Value).
the simplest way to calculate the return after many cash flows, is to revalue each time there is a cash flow and calculate a return, then chain linked the return on a (1+r period 1) times (1 + r period 2) ... times (1 + r period n), where r = return and n = last period.
for example, OMV = 10 million, CMV on day before cash flow = 11 million,
return index = 11/10 = 1.1 index value for the first period (or 10%)
the next OMV = 11 million plus, say, cash flow of 1 million.
repeat on next cash flow date with an OMV plus cash flow = 12 million.
keep each index for each time period between cash flows and multiply them together.
this gives you a time series of index values between each cash flow.
you will end up with a number like 1.6543 (this is how a total return index works).
the next trick is to standardize the period. you are probably going to want an annualized rate of return and your cash flows are probably days apart.
you can do this by dividing the closing index (the result of all multiplying all the indices together) by the opening index and multiplying that answer by "the power of" your chosen time period.
for example, to convert a full period return of 10% in six months to an annual return, you would plug this into a spreadhseet cell A4 "=1.1^(365/182.5) to get another "index of 1.21 take the one off and you get your annualized return of 21%.
for longer periods, you can do the same thing. say you want to work out the annualized return of 71% over 4 years 28 days. cell A4 "=1.71^(365/1489) to get another index of 1.140551, take the one off and multiply by 100 and you get a percentage return of 14.06% per annum.
of course, if you are really have lots of computing skills, time and analytical ability, you will want and need work out the RISK, you took to get this return.
RISK is the annualized monthly standard deviation of returns - which would mean you would need to work out market values of your portfolio every month.
After all, getting 14% per annum is much better with RISK of just 5% per annum (returns between +9% and +19% two thirds of the days/years) than it is to get 14% per annum with RISK of 25% (returns between -11% and +39% per annum two thirds of the days/years).
when you have done that. you might want to know how much you paid in fees within your portfolio to get that.
why pay 1.5% per annum for an investment that provides the same return as one that charges 0.5%?
still, the earlier maths holds true if all you need is the total return.
CMV - OMV, reval each time there is a cash flow, then annualize by raising to the power of number of time periods divided by number of time periods in a year.
hope this helps/is clear.
Robin Stone
Posted: 15 May 2018 17:26:58(UTC)
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I am surprised platforms don’t offer this in a more easy to use way as you don’t want to double enter it or usually give another unregulated app access to all your investments.
My simplistic workaround is to buy in consistent units (eg 1500) with auto reinvest. Clearly it’s not perfect and share price sizes like in the us this doesn’t work but for a winning vs losing it works for me.

If we gang up on one provider maybe they will invest in it.
paul armstrong
Posted: 15 May 2018 18:50:22(UTC)
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Monevator had a good article about this, based on unitising. Worth a read.
Geoff James2
Posted: 16 May 2018 06:59:35(UTC)
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I use Microsoft Money - It is available on a free license now it is unsupported/sunset (for many years). I have not found anything that comes close to the features it provides "for free".

I also have the add-on from Gaier Software so that I can pull stock valuations in automatically. This is not as great as when Money did this automatically - but it is still very good.

So I can mark to market my portfolio very easily and I can see performance against each holding or rolled up by account, bty group of accounts and/or against a date range.

There is an extensive range of reports that can be tailored - it does everything I want. One thing that remains a problem is unrealised and realised capital gains. The UK CGT rules are beyound the logic on MS Money. It gets close but not close enough.

Geoff

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