How can I have negative returns but positive percentage returns? I get that they are updated at different times but these values have been the same for weeks and it just doesn’t make sense, I can understand the nominal value going down as the value of shares goes down relative to mine but where is the % value coming from?
Should I be focusing more on nominal or percentage values?
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Hi Ryan,
The percentage investment return which we show is the time‑weighted return (TWR).
This gives a better picture of performance for portfolios where you have made more than a single contribution and/or withdrawals.
Let me point you in the direction of our FAQ - (https://help.investengine.com/hc/en-gb/articles/5532757024541-TWR-percentage-return?source=search&auth_token=eyJhbGciOiJIUzI1NiJ9.eyJhY2NvdW50X2lkIjo5MTkxMjg0LCJ1c2VyX2lkIjo2MzE4Nzc0Mzk5MDA1LCJ0aWNrZXRfaWQiOjQzMzU5LCJjaGFubmVsX2lkIjo2MywidHlwZSI6IlNFQVJDSCIsImV4cCI6MTY2NTI0MzUyM30.h8aj4VfAp9Fv9UWzeMAkS5NVaA1VLY5Dux_pJe3y8cg)
This should give you a good understanding and help answer your question.
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I’ll give a simple example. If an investor starts the year with 10k over the first 6 months the value falls to 5k - the performance is -50%. The investor then puts another 10k in - total portfolio size 15k. At year end portfolio is now 22.5k - a gain of 50%. Total performance for the year is -25% (1 * 0.5 * 1.5) but the monetary gain is +2.5k
ok that makes more sense, thanks shrimper. Im terrible at the calculation parts i just needed someone to dumb it down for me.
I still don’t find TWR useful though if your adding regularly each month more if you lump sum each year as the TWR will be more inline with returns. I’d much prefer to see ROI% replacing TWR%, handy if you could change that in the settings part of the app.
Am I missing the importance of TWR? Can you give an example of its intended usage in determining positive investments?
TWR is the standard used in the asset management industry. Normally fund managers are not in control of when they receive fund inflows or outflows - so it removes the luck of cash in or out distorting the skill (or otherwise) of the fund manager. Take the previous example - if the extra money was placed by an external client - the fund performance is -25% as the fund manager exhibited no skill in the external client putting money in.
Does that help?