Compounding %Gain or ROI

[jpa]

Mark,
When I select a monthly performance report and select the %Gain or ROI, then compound the monthly returns, it doesn't match the % change in values from Starting Balance to Ending Balance. The portfolio flows are negligible, although there are changes in the investments.
Is there any monthly return that would coincide with the total % return.
Thanks again! Paul

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[Mark]

Hi jpa,

What are the "negligible" transactions? Any transactions will make a difference. The ROI numbers are time/money weighted, so are solving the true yield equation. If you run a Custom report with "ROI (between)" for the 4 month period, how does that compare to your compounded calculation for ROI? How are you compounding your monthly returns in your spreadsheet? Why do you have 2 different sets of Start/End/% Return numbers?

[jpa]

"Negligible" means that there weren't any flows in or out of the portfolio, but there were buys/sells of investments.
The "compounding" is 1+%Gain x 1+%Gain.....
One Start/End is 4months of data and the other is 3months of data. I tested both because I thought the purchases of investments on the 2nd day of the first month might be impacting the calculations, but the calculations also didn't work for the 3months of data where there weren't any inflows/outflows from portfolio.

[Mark]

Hi jpa,

The buys/sells impact %ROI because these are time/money weighted. The performance while you have more money invested is more heavily weighted while you have more money invested. This is not true of either %Gain (which are simple division), or the start/end value change calculations. See the ROI yield equation in the documentation here:

https://www.fundmanagersoftware.com/hel ... s_roi.html

[jpa]

Thank you. I think I have it figured out.