Annualized TTWROR

Dear colleagues,

under Reports -> Performance -> Securities, the column TTWROR is showing a wrong value for one of my instruments (FR0010251744).

I bought 54 shares of this ETF on 24th Jan. 2017 at 91,65 EUR and now is at 94,40. Considering the 6 dividends payments of 540 EUR total (-113,51 EUR taxes), I get an Abs. Perf. for the last 3 years of 11,28% (correct) and an IRR of 4,59% (correct) but a TTWROR of 13,86%, which does not make any sense at all.

Can anybody tell me what is it happening?

Thank you very much in advance

Hey Ernesto,

welcome to the forum.

I did not dig into TTWROR so far, but just as a comment if you do not deduct the taxes (which is always the case when talking about general performance) you get around 13.9 % ((5494.40+540)/(5491.65)-1).

Have fun

Thank you Harry for your prompt answer.

I understand from your (and others) clarifications, that TTWROR is not averaged per year for the selected timeframe.

My point is that Time-weighted-returns is the only way I find to compare investments (specially value-investments with dividends) without considering how much did I invest and when along the duration of the investment (for that purpose, IRR is the way to go).

Problem is that to compare investments, a yearly averaged of TTWROR is needed.

Thank you again.

Best regards,

Ernesto

Der Ernesto,

why do you not change the reporting period to 1st/Jan - 31st/Dec? The time weighed rate of return should be now comparable with other investments.

Br
Marco

Hi Marco,

that gives me indeed a comparable value, but for a different purpose (just last year / one-year investments performance).

When buying and holding multi-years investments like ETFs / IFs, you cannot do that.

  • The period chosen should represent the duration of the portfolio one is trying to get an assessment of
  • The TTWROR value should then avoid the cashflows (correct) and deliver an averaged value (incorrect), so one can always get a useful figure, no matter how long the period is.

This is specially useful, since then you can even compare it with IRR, since both are annualised figures, and answer many more what-ifs scenarios…

I understand the cases an absolute TTWROR figure is useful for, but I just find more cases where an averaged one is.

Thank you again.

Best regards,

Ernesto

Basically TTWROR is a non annualized figure, as far as I know. If you have examples and a how-to to calculate these straight forward please kindly share your knowledge…

The time-weighted return (TWR) [1][2] is a method of calculating investment return. To apply the time-weighted return method, combine the returns over sub-periods, by compounding them together, resulting in the overall period return. The rate of return over each different sub-period is weighted according to the duration of the sub-period.

The time-weighted method differs from other methods of calculating investment return only in the particular way it compensates for external flows - see below.

I share the view of the original post. It would be great to have an annualized TTWROR (the only feature I am truly missing about this great tool). It can be calculated as follows:

(TTWOR + 1)^(1/n) - 1,

where n is the length of the period in years.

This is the usual formula for CAGR, compare also the note and the link at the bottom of the following page:

TTWROR CAGR

I imagine it to be a small change to add the “annualized TTWROR” in addition to TTWROR which would however bring tremendous value for any long-term portfolio/ investor!

Maybe this is something worth considering in a future release? In any case, many thanks for such a great tool :slight_smile:

sunny

Maybe also worth to add an example: say TTWROR = 21%, period = 2 years, then annualized TTWROR = 10%.

Note that (i) due to compound interest the return over the period is 21% (1.1 x 1.1-1) rather than 20% (2 x 10%) and (ii) assuming no cash flows took place IRR = annualized TTWROR. Point (ii) is a very important consistency requirement!