XIRR vs Unitized total return = Ratio?

masonic

george4064 said:

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

My annualised calculations were as follows:

30 April 2019 to 31 August 2021 = 28 months

Annualised unitised performance:
1.335^(12/28) - 1 = 13.2%

And XIRR total return:
1.222^(28/12) - 1 = 59.6%

Ah, ok, so you've rounded it to 28 months (2.33 years), whereas I took it as 880 days (2.41 years), using the 27th August figure in the OP as the end date. Probably only making so much difference as the time period is short.

Aceace

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

I didn't totally understand your points regarding Vanguard's stated personal returns. So, to clarify, I was merely trying to answers the question as to whether they give an annualised return or total IRR over the whole period of investment. The answer is that it is not annualised. I.e. for one of my accounts with a deposit 3 and a bit years ago and no withdrawals they quote a personalised return of 33%. My calculations of the XIRR (so annualised) for this account is 9.3%.

Here's what Vanguard say: 

Your rate of return

You started with – This is the value of the portfolio (investments and available cash) at the start of the selected date range.

You contributed and withdrew – This is the net value of total payments, withdrawals and transfers in and out of the portfolio during the selected date range.

Your investments returned you – The increase or decrease in the value of the investments held in the portfolio, based on the last known market value during the selected date range plus the gain or loss on investments sold from the portfolio.

You ended up with – This is the value of the portfolio (investments and available cash) at the end of the selected date range.

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.

Reg_Smeeton

masonic said:

george4064 said:

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

My annualised calculations were as follows:

30 April 2019 to 31 August 2021 = 28 months

Annualised unitised performance:
1.335^(12/28) - 1 = 13.2%

And XIRR total return:
1.222^(28/12) - 1 = 59.6%

Ah, ok, so you've rounded it to 28 months (2.33 years), whereas I took it as 880 days (2.41 years), using the 27th August figure in the OP as the end date. Probably only making so much difference as the time period is short.

Thank you for the useful posts, I’ve been trying to calculate my returns in the same way as the OP and you’ve provided some really helpful clarification.

Pardon my ignorance, what does the little up arrow mean? I assumed it was “to the power of”, but if I use the OPs numbers I’m not getting the same answer in the calculation. Please could you break it down for me?

masonic

Aceace said:

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

I didn't totally understand your points regarding Vanguard's stated personal returns. So, to clarify, I was merely trying to answers the question as to whether they give an annualised return or total IRR over the whole period of investment. The answer is that it is not annualised. I.e. for one of my accounts with a deposit 3 and a bit years ago and no withdrawals they quote a personalised return of 33%. My calculations of the XIRR (so annualised) for this account is 9.3%.

Here's what Vanguard say: 

Your rate of return

You started with – This is the value of the portfolio (investments and available cash) at the start of the selected date range.

You contributed and withdrew – This is the net value of total payments, withdrawals and transfers in and out of the portfolio during the selected date range.

Your investments returned you – The increase or decrease in the value of the investments held in the portfolio, based on the last known market value during the selected date range plus the gain or loss on investments sold from the portfolio.

You ended up with – This is the value of the portfolio (investments and available cash) at the end of the selected date range.

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.

Thanks, I gleaned from what you posted that it wasn't the simplistic profit/loss figure based on current holdings only that is presented elsewhere (whereby if you sell a holding, any profit or loss made on the disposed assets is no longer included in the calculation). From the information from Vanguard, it is clear they are including returns on previously disposed investments and accounting for cash flows, which gives a meaningful (non-annualised) figure.

masonic

Reg_Smeeton said:

masonic said:

george4064 said:

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

My annualised calculations were as follows:

30 April 2019 to 31 August 2021 = 28 months

Annualised unitised performance:
1.335^(12/28) - 1 = 13.2%

And XIRR total return:
1.222^(28/12) - 1 = 59.6%

Ah, ok, so you've rounded it to 28 months (2.33 years), whereas I took it as 880 days (2.41 years), using the 27th August figure in the OP as the end date. Probably only making so much difference as the time period is short.

Thank you for the useful posts, I’ve been trying to calculate my returns in the same way as the OP and you’ve provided some really helpful clarification.

Pardon my ignorance, what does the little up arrow mean? I assumed it was “to the power of”, but if I use the OPs numbers I’m not getting the same answer in the calculation. Please could you break it down for me?

Yes the up arrow is "to the power of". Be sure to use brackets or you will calculate 1.335^12 and then divide that result by 28, taking the upper example (or enter 12/28 as a decimal = 0.4286).

Reg_Smeeton

masonic said:

Reg_Smeeton said:

masonic said:

george4064 said:

masonic said:

george4064 said:

Thank you all for your responses, you have pointed out my blunder that I had not annualised my unitised performance. Now having done that calculation the figures look much better!

XIRR = 22.2%
Unitised performance (p.a. %) = 13.2%

XIRR (total) = 59.8%
Unitised performance (total) = 33.5%

Finally, does any Vanguard investors here know if Vanguard's 'personal rate of return' gives the annualised IRR figure or do they calculate the total IRR over the period? My OH is with Vanguard so I like to compare.

That's a very good result, although the figures look a bit out to me. For the annualised unitised figure, I make this 12.7% (Period is equal to 2.408 years; annualised value = 1.335 ^ (1/2.408) = 1.127). For the total XIRR figure I make it 62.1% ( = 1.222 ^ 2.408 = 1.621).

I don't know, but think it is very unlikely that Vanguard does different to virtually every other platform, which just calculates returns based on the current holdings and their average acquisition price. Looks like Aceace has a better answer for this one, perhaps it does include disposals, unlike many providers.

My annualised calculations were as follows:

30 April 2019 to 31 August 2021 = 28 months

Annualised unitised performance:
1.335^(12/28) - 1 = 13.2%

And XIRR total return:
1.222^(28/12) - 1 = 59.6%

Ah, ok, so you've rounded it to 28 months (2.33 years), whereas I took it as 880 days (2.41 years), using the 27th August figure in the OP as the end date. Probably only making so much difference as the time period is short.

Thank you for the useful posts, I’ve been trying to calculate my returns in the same way as the OP and you’ve provided some really helpful clarification.

Pardon my ignorance, what does the little up arrow mean? I assumed it was “to the power of”, but if I use the OPs numbers I’m not getting the same answer in the calculation. Please could you break it down for me?

Yes the up arrow is "to the power of". Be sure to use brackets or you will calculate 1.335^12 and then divide that result by 28, taking the upper example (or enter 12/28 as a decimal = 0.4286).

Thanks, just dug the scientific calculator out and followed the calculation through again (rather than using calculator on phone....) got it now!

tebbins

Aceace said:

Vanguard's "Personal rate of return" is a total return since one started investing, so not annualised. 

I would have thought from Vanguard's description as an internal *rate* of return that it was annualised. I suppose the only way to know for sure is to calculate it myself based on my cashflows.

Aceace

tebbins said:

Aceace said:

Vanguard's "Personal rate of return" is a total return since one started investing, so not annualised. 

I would have thought from Vanguard's description as an internal *rate* of return that it was annualised. I suppose the only way to know for sure is to calculate it myself based on my cashflows.

It's definitely not annualised. As I said above, I have an account where they quote a personalrate of return of 33%. It's a simple account with one deposit and no withdrawls. The currently stated value is 33% more than the deposit over 3 years ago. My calculated XIRR (actually, Google Sheet's calculated XIRR) is 9.3%, which is clearly an annualised return. 

tebbins

Aceace said:

tebbins said:

Aceace said:

Vanguard's "Personal rate of return" is a total return since one started investing, so not annualised. 

I would have thought from Vanguard's description as an internal *rate* of return that it was annualised. I suppose the only way to know for sure is to calculate it myself based on my cashflows.

It's definitely not annualised. As I said above, I have an account where they quote a personalrate of return of 33%. It's a simple account with one deposit and no withdrawls. The currently stated value is 33% more than the deposit over 3 years ago. My calculated XIRR (actually, Google Sheet's calculated XIRR) is 9.3%, which is clearly an annualised return. 

Current value / total deposits is different to the money-weighted rate of return. For example for me the first number is 20.8%, whereas the return figure Vanguard gives me is 55.49% (both since i opened the account). What this tells me is almost all of my profit happened because I got very lucky in the Covid crash. IRR means the internal *rate* of return, the other number is just how many times more than your deposits you have now.

Aceace

tebbins said:

Aceace said:

tebbins said:

Aceace said:

Vanguard's "Personal rate of return" is a total return since one started investing, so not annualised. 

I would have thought from Vanguard's description as an internal *rate* of return that it was annualised. I suppose the only way to know for sure is to calculate it myself based on my cashflows.

It's definitely not annualised. As I said above, I have an account where they quote a personalrate of return of 33%. It's a simple account with one deposit and no withdrawls. The currently stated value is 33% more than the deposit over 3 years ago. My calculated XIRR (actually, Google Sheet's calculated XIRR) is 9.3%, which is clearly an annualised return. 

Current value / total deposits is different to the money-weighted rate of return. For example for me the first number is 20.8%, whereas the return figure Vanguard gives me is 55.49% (both since i opened the account). What this tells me is almost all of my profit happened because I got very lucky in the Covid crash. IRR means the internal *rate* of return, the other number is just how many times more than your deposits you have now.

Yes, I wasn't saying that Vanguard's calculation was as simple as Current Value / Total Deposits, though it will be in the simple case where there is only a single deposit and no withdrawls. I was just using this simple example to show that Vanguard's quoted figure was definitely not annualised, which was the question I was trying to answer.