Tracking performance over time

[Wintergreen78]

I’ve never paid much attention to my annual returns. Years ago I set up a spreadsheet to track how much I saved each year. I used the future value function to create a table. Each column in the table shows how much those annual investments would be worth if they appreciated at a fixed rate of return. At the end of the year I compare the actual value of my portfolio to the table and highlight the entry that most closely matches the actual value. This gives me an idea of my lifetime average returns.

This is probably an idiosyncratic way of tracking, but i found it useful as a way to keep myself focused on long-term performance. I’m curious do other people use anything similar, or have some other way they track their lifetime performance?

Here’s an example table for someone who starts with $5,000, saves $5,000 in the first year, then boosts their savings by $500 each year after that.

[Financial.Velociraptor]

I sometimes build the CAGR formula into my spreadsheets: (currentValue / originalValue)^(1 / ((currentDate - originalDate)/365)) - 1


That seems to be the best measure of long term results to me.  But really, as long as my liquid networth is up year over year, I'm happy.

[Wintergreen78]

The CAGR formula works if you are calculating the return for a single investment. If you want to track a series of investments over time, and each investment may be a different amount, it seems like it would take some fancy math to figure out your overall rate of return. Would you just weight them by their ending values, or would you also need to consider how long you’ve held each position?

[kingxiaodi]

The CAGR formula works if you are calculating the return for a single investment. If you want to track a series of investments over time, and each investment may be a different amount, it seems like it would take some fancy math to figure out your overall rate of return. Would you just weight them by their ending values, or would you also need to consider how long you’ve held each position?

I believe you can use Time-Weighted Rate of Return in that case. Here's an article that explains how to calculate CAGR from TWR (it also does a pretty good job explaining TWR and how to calculate it).

(Insert caveat that I'm just a random dude and may not know what I'm talking about. If I'm wrong, please correct me!)

Ugh, I typed out this reply, and then I re-read your post. I'm thinking that I may have answered a different question than the one you asked. I'm going to post anyway because I think the above is helpful knowledge to have. I'm sorry if it doesn't address what you asked!

[Phenix]

I personally enjoy using the BogleheadsReturns spreadsheet in google docs.
https://www.bogleheads.org/wiki/Calculating_personal_returns

Anybody else here use it?

[Wintergreen78]

Oh, nice, I think that CAGR formula is what I was looking for. That seems like the proper way to track performance over time. I’m too lazy to record every contribution and withdrawal, so for my tracking sheet I just calculate the total for the year, then assume it happened evenly throughout the year. When I was working I made most contributions through paycheck deductions, so that is a pretty good approximation.

Since I don’t feel like transferring everything over, I don’t think I’ll start using that bogleheads spreadsheet, but that seems like a really good tool.