Calculating Performance

[bovie]

Sorry for the possibly naive question, but what do you mean by cashflows?

The money you put into and take out of the account.

The timing of the cashflows, and associated returns of the assets you hold with respect to that timing, affects your overall return.

[FrancisBayes]

I submitted a column (since approved) about how to calculate annualized real returns, so I will post it in this thread later when it's published. But until then...

1. Calculate money-weighted return (MWR) using the XIRR function: https://www.whitecoatinvestor.com/ho...xirr-function/
- Cashflows = deposits and withdrawals into your accounts
- Ignore dividends unless you withdraw them
- Calculate MWR for accounts and portfolios (eg, retirement, college), not each asset class

2. Calculate after-inflation (real) return
= (1 + MWR ) / (1 + inflation rate) - 1

[Eluna]

You are missing something: cashflows.

Use XIRR.

Sorry for the possibly naive question, but what do you mean by cashflows?

[bovie]

You are missing something: cashflows.

Use XIRR.

[Eluna]

How do you all go about calculating the % return on your retirement portfolio? So far I have been using this formula: end of year total/ (start of year+contributions) - 1 to get my overall performance across the accounts.

I have just been ignoring dividends currently as they are not very much yet, but the plan is to just include dividends in the contributions as the plan right now is to just reinvest them. Is this how you all do it or am I missing something?