My current portfolio has a purchase cost (FIFO) of 31.446 euros. The market value of the assets is 31.764 euros. Therefore, performing a simple calculation, you can see that there is a total return of +1.01% on the investment. However, in the “performance” section if I select (TTWRoR Acc YTD) a performance of +1.28% is indicated. They don’t seem to match.
My investment is only a month old. So the data indicated in YTD should already be correct to indicate the total return on investment.
What causes this difference between +1.01% and +1.28%? Should they match, or am I confusing two different concepts?
It’s possible to show the actual current performance in the “performance” section, that is, +1.01%? It seems that I only manage to show the wrong percentage (+1.28%).
1.01% is Gain/Purchase cost. 318/31446. Generally speaking, the TWR is not equivalent to this.
What will become of this 1.01% if you now invest 40 000 euros ? 318/71446=0.45%. Is this really your performance ? Going down just because you invested more ?
TWR is more robust than the above formula and is not sensitive to such movement.
The only case when TWR and the naive return matches is when there is a single buy operation. As long as several buys or partial sells occur, it is normal that they do not match anymore.
Did you invest the 31 446 is a single buy or over several buys at different dates ?
The two metrics are TWR and IRR (=Money Weighted Return)
Both are better than the simple return because the movements are taken into account into their evaluation (simple return does not do this). Differences between TWR and MWR is that MWR takes into account if you made +5% on 50k€ vs +5% on 10€, while for TWR +5% is +5% whatever your invested amount at the time.
One characteristic of the IRR is that is it an annualized value. To unannualized it:
(1+15.1/100)^(46/365)=1,0179=1+1.79/100 +1.79% (you can adjust the 46 to the real number of days of your reporting period).
I do not think PP is showing the unannualized value of the IRR. But on the opposite you can get the annualized value of the TWR.
But if we use this calculation for YTD (approximately 46 days), the return is +1.79, it does not coincide with the simple return (+1.01%) which is the return I would really get if I refunded all the money currently. Is there a way to show this return in the performance section?
