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Growing Your Wealth Your Way

We are able to provide a wide variety of investment choices including mutual funds, ETFs, stocks, and bonds.

We are an independent investment service. The investment decisions we develop with you are not tied to any directive or incentive to promote specific products. We assist you to design a portfolio that aligns with your objectives.

Making sense of rates of return

Financial Services has an abundance of acronyms and glossary terms that can be downright confusing. Even something as seemingly straightforward as the rate of return isn’t without a certain level of complexity.

The most important consideration is how you intend to use the information.

  1. Are you assessing the performance of the portfolio manager?
  2. Are you evaluating your personal rate of return?
  3. Are you most interested in long-term performance, looking for shorter-term buying opportunities, or assessing whether it’s time to take some profits?

There are two commonly used methods for measuring the rate of return of a portfolio: time-weighted vs money-weighted. Both are informative depending on your purpose.

When you look at the profile of a specific investment fund, you are seeing the time-weighted return. We often use data provided by independent research firms such as Morningstar and Fundata to evaluate funds (managed portfolios).

When you look at your own portfolio summary, you are seeing the money-weighted return. We always report net of fees so it is the true measure of your investment performance taking into consideration related costs.

See the following examples to understand the differences if you’d like to delve further.

 

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Determining which portfolio managers you want to have managing your money and when you want to invest are informed by these types of calculations.

Hope this is helpful if you are puzzled by different rate of return calculations. If you have any questions, you can always call us.

 

*Graphics adapted from CI Investments’ “Making Sense of Your Investment Performance”

 

The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

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