How many times do you glance at the scoreboard during a game? We do rely on it to assure ourselves our team is really winning… or losing. We do the same with our investments. There are several ways to score investment performance, from simple to sophisticated. Here’s a simple one.
|Start Value (-)||End Value (+)||Gain / Loss||Contributions (-)||Withdrawls (+)||Net Gain / Loss||%|
Start with total value at the beginning of the year and subtract that number from total value at the end of the year; the result is overall gain or loss for the year. If you added money to your accounts during the year it would affect overall gain or loss but would say nothing about investment performance… so you would subtract any contributions from overall gain or loss. Withdrawals from your accounts during the year count as part of investment performance… so you would include any withdrawals by adding them to overall gain or loss. The final result is a simple net (of contributions and withdrawals) gain or loss. Dividing net gain or loss by total value at the beginning of the year gives a percentage for that year’s gain or loss. This percentage gain or loss is only a ballpark indication of actual investment performance, but it does say you are gaining or losing and it does provide a number to compare with results of other years, to show a general trend.