Re: very high numbers for yield

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Posted by Mark on August 28, 2006 at 12:55:47:

In Reply to: Re: very high numbers for yield posted by jeffrey on August 28, 2006 at 11:42:41:

: re: stock b: doesn't including an investment held for two weeks, as if it was held for the whole year skew the portfolio return figure?

: i am beginning to see that calculating "porfolio return" may be much more complicated than i originally thought. i originally assumed that i was simply looking for a portfolio performance number based, eg, on amount in portfolio at beginning of period, compared to value of stocks and cash at end of period, but somehow not including cash added (or removed?) along the way. in other words, how well was i doing compared to just leaving all money in a mutual fund. but, adding cash, taking out cash, investments that are only held for two weeks, etc, seem to hopelessly complicate getting a meaningful number. perhaps there is no way to reliably compare individual investments strategy with simply leaving a fixed amount in one investment for the whole period?

Hi Jeffrey,

Portfolio returns factor in all the investments in the portfolio. Everything is weighted by time and value when doing the ROI calculation, so if you sold stock B and had it invested in cash for the rest of that year, your portfolio return would be quite reasonable, since the portfolio saw all your money for the whole year. This is different than the individual investment that may have had holdings for only a short period in the year. This is why it is a good idea to use a default cash account, and keep track of your cash, as that does affect your portfolio ROI figures.

If you're an "equation person", you might want to check out the ROI yield equation used by FM here:

http://www.fundmanagersoftware.com/help/yields_roi.html

When calculating ROI for a whole portfolio every transaction from all investments generates another term in the yield equation.

Thanks,
Mark
--
Fund Manager - Portfolio Management Software

Replies:

• Re: very high numbers for yield Jeffrey 13:51:43 08/29/06 (1)
  • Re: very high numbers for yield Mark 14:07:50 08/29/06 (0)