((ending account value) - (starting account value) - (contributions))/(starting account value)
(150k - 130k - 10k) / 130k = 7.69%
thanks. yes, in a simplistic way that accounts for some of it. But if you made your contribution at the beginning of the year and the value of assets purchased with those contributions increased in value and paid dividends, then it's a bit complicated to figure out what your return is without the influence of the contributions during the year. I guess there is no easy way to do this? I just wondered how others do comparisons of performance of their accts against the sp500 index, when the index doesn't get contributions (other than reinvestment of dividends). If your your percent return is the same as the sp500index and yet you made contributions equivalent of 3% of the acct value, are you then underperforming the index by 3%? How do you guys think about this when comparing your investment performance to an index?
You're right in that it doesn't work out the performance based on the time your contribution was in the portfolio. It's a good way to get your total return for the period and should work fine if you're not making large lumpy contributions.
If you want to get a bit more serious, and have semi-decent excel skills you can easily build yourself a time weighted performance spreadsheet. Works a lot easier if cash is included the portfolio value.
To do this, simply get the daily value of your portfolio, and calculate the daily return adjusted for each contribution or withdrawal, and at the end of the period just sum the daily returns. If your cash account is included then no need to worry about dividends as they either DRP or increase the value of the cash account. I include dividends separately so I can split returns between capital and income. If you don't have the cash account included, you would either capture the dividend in a separate column or treat a cash dividend as a withdrawal, as it is leaving the portfolio.
It's a pain the arse to setup, but works well with a couple of copy and paste of transactions and stock prices. But I like playing around with spreadsheets, so if you don't you might not want to spend the time.
And if you including dividends and want to compare to a benchmark, ensure you use an accumulation or total return index...
Cheers