Understanding my HL investment overview - gains and losses

Lois_and_CK

I opened a SIPP in March this year.

In the Gain/Loss column it says £4,594 and the percentage is 14.15% (gain). Does this mean that, since March, my investments have returned 14.15% in total?

I'm confused with the equivalent information in my husband's SIPP, which has been running for a couple of years. His gain is £7,284 / 22.34%. Does this mean his investment has returned 22.34% over the three years it's been open? How do I work out the yearly return? Is it a case of dividing 22.34% by 3? So 7.45% return per year? Or does it not work like that?

I'm pretty sure I've misunderstood this somewhere along the line...

mvteng

Lois_and_CK wrote: »

In the Gain/Loss column it says £4,594 and the percentage is 14.15% (gain). Does this mean that, since March, my investments have returned 14.15% in total?

Yes

Lois_and_CK wrote: »

I'm confused with the equivalent information in my husband's SIPP, which has been running for a couple of years. His gain is £7,284 / 22.34%. Does this mean his investment has returned 22.34% over the three years it's been open? How do I work out the yearly return? Is it a case of dividing 22.34% by 3? So 7.45% return per year? Or does it not work like that?

It just means that today the return is 22.34%.


It might have gone up 50% in year 1, then down 30% in year 2, then back up in year 3.


You cant work out yearly return from todays figure

Lois_and_CK

Thanks for your reply.

I'm still a bit confused! If my total return of 14.15% is over five months (since March), I don't understand how my husband's return is just over one day.

JohnRo

The total return number you're looking at when you log in today is the difference between what your investment is worth now, today, and how much you paid for it when you bought it, when ever that was.

When you bought it has no relevance to the simple total return value you're talking about. That number is simply showing you how much more (or less) the market values your investment above (or below) what you paid for it.

Only when you start looking to calculate time based metrics, such as average annual return, does 'when you bought it' become important.

Lois_and_CK

Ohh ok, thanks - I get what you mean now! I'm not usually this dim :-)

So to get average annual returns, how do you go about that?

JohnRo

The simplest way is to count the number of days you've held the investment and divide that number of days by 365.25 (days in a year)

Then use that number, whatever it is, to divide your total return.

Example, 22.34% total return, investment held for 1096 days,

22.34 / (1096/365.25) = 7.44% Average Annual Return

Lois_and_CK

Thank you, much appreciated.

Malthusian

The strictly correct calculation for your annual return is to take one plus your total return and raise it to the power of one divided by the number of years, and subtract the one.

E.g. the three year return is (122.34%) ^ (1/3) - 1 = 6.9%.

This is because returns, like interest, are compounded. And something that returns 14% over two years is not as good as something that returns 7% over one year (and again the next year).

But for short time scales, dividing by number of years is not a bad approximation if you struggle with the above calculation.

Lois_and_CK

Thank you Malthusian!

bigfreddiel

Have they ceased teaching basic arithmetic? fj

Only kidding, but it's not exactly rocket science now is it.

Lois_and_CK

No, it's not rocket science. Investing and maths don't come easily to me. I'm still learning, hence the questions. But thanks for making me feel stupid.