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.
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).
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.
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.
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:
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
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!
In my portfolio, there are two stocks. One held for less than a year and the other for more than a year. I ran the report (Performance → Securities) for 1 year to look at the TTWROR pa to compare returns. For the stock held < 1y, the TTWROR pa is the same as TTWROR cumulative. I would have expected to calculate annualised TTWROR based on the actual number of days held.
Is this a limitation or is a work around available?
I believe a similar issue has been raised in this post
The TTWROR basically makes sense if you have securities which you have bought more often at different points in time (e.g. saving plan). For these scenarios the TTWROR puts the different purchases in relations by the amount of time they exist in your portfolio. For a single purchase the TTWROR simply calculates the performance (value at end/value at beginning) indipendant of period held (hint, be aware of reporting period).
I have a security that has been purchased multiple times during the last 6 months. If I select the reporting period of 1y, the annualised TTWROR is the same as the cumulative TTWROR. This is not an issue for security held for more than a year (doesn’t matter if its a single or has multiple purchases). So, I am unable to get a like for like comparison (as far as annualised TTWROR is concerned) for different securities held in last 1y.
