Vanguard Personal Growth Rate

lindabea

My brother has a VLS fund and tells me that on the Vanguard website, the personal growth rate is shown as 16.6%. Out of curiosity, I took the relevant figures and put them into a spreadsheet using the XIRR formula. I was somewhat astonished to see that the % return comes out as 9.84.

Although I wasn't expecting to arrive at the exact figure, I didn't expect such a wide variation. I double checked my figures, and they're all correct, so can someone please explain what may be causing the difference. I did think I may not be comparing like with like, but I would like to know how VNG come up with 16.6% as I thought that XIRR gives you the percentage increase from the date of the investment.

sendu

I believe the Vanguard figure does something like extrapolate the gain so far this (tax? calendar?) year through to the end of the year.

Linton

When doing the return over say a year precisely which dates you use can make a massive difference.

lindabea

SENDU - I can see what you mean if they're using the tax year; as for calendar year, that's what XIRR is using, so I would have expected the figures to come up more similar.

LINTON - I'm keying in the dates as shown on the Vanguard site as the actual 'BUY' dates and the exact amount invested respectively.

This is why I can't understand what is causing the wide variation.

sendu

Does the IRR formulae match Vanguard's number? Maybe ask Vanguard support to explain it.

joeprosho

i posted a similar query a few days ago about VLS funds, mine was however I think down to the dates I was looking at... e.g. annual financial report showed a decline over a 12 month period of -2.2 yet the figures in the chart below showed growth of 6.8

came down to the difference between years reporting march and june

lindabea

sendu wrote: »

Does the IRR formulae match Vanguard's number? Maybe ask Vanguard support to explain it.

Don't know what you mean by 'Vanguard's number' If you mean the percentages- the answer is NO. Vanguard say growth is 16.6% and XIRR formala comes out as 9.84%. Quite a variation for something that should be closer. I can't speak to Vanguard as it's not my investment.

SonOf

Most of Vanguards UK retailed funds have never been through a serious crash on the markets. So, you really need to be careful when looking at growth periods that include very few or any real negative periods.

staffie1

Are you talking about Personal Rate of Return? (Since account opened). Their help says:
Your rate of return – Your personal performance uses a formula called internal rate of return (IRR), which is a pound-weighted return. IRR takes into account new money coming into your investment, as well as how long that money has been held. Don't confuse your personal rate of return with those posted for funds and indices. The returns shown for funds & indices use a different, time-weighted calculation, which does not take cash flow in consideration.

Alexland

SonOf wrote: »

Most of Vanguards UK retailed funds have never been through a serious crash on the markets. So, you really need to be careful when looking at growth periods that include very few or any real negative periods.

This was a question about the platform growth rate calculation rather than how the funds would perform during a market crash which would be more determined by the underlying asset allocation than when the funds were started. Most retail fund datasheets are no longer showing the last major market crash.

Alex

SonOf

Most retail fund datasheets are no longer showing the last major market crash.

And because of that, a lot of new investors with limited knowledge are going to be caught out when the next major crash occurs.