Do you know how did your investment portfolio performed in last one year or last quarter or last month?
I asked this question to some of my friends and NONE of them knew the right answer. Some smart souls took wild guesses and linked their returns to the instrument they invest in. So someone primarily investing in bank fixed deposits said he got a return of almost 9% as the bank was paying him that interest.
Though calculating return on portfolio seems simple but unfortunately it’s not. You can easily calculate your returns if you have lump sum investment. For e.g. you invested Rs 1 Lakh in SBI fixed deposit and end of year you got Rs 1.09 Lakhs in your account, so your annual return comes out to be 9%.
But our investment pattern is not so simple. Many of us have SIPs (Systematic Investment Plans) in Mutual Funds or have Recurring deposits (RD) with banks. There are times we withdraw money from these investments. Thus, we constantly keep on investing and withdrawing money from our portfolio. On a conservative basis, if you have 5 monthly SIPs, 2 RDs and one lump sum investments/ withdrawals every month in a year, you are making close to 100 transactions a year. This makes the return calculation very complex.
If you are familiar with excel sheet you still can list down these 100 transactions with date and run IRR function. But then most of us are too lazy or too naïve to do this. And thus the return on your portfolio is always guessing game!
We have a simple solution to your complex problem!
We have made an excel sheet template in which you just need to enter the starting and ending portfolio balance along with deposits/ withdrawals made in the month. This would give you the monthly return. As you go on entering these values for every month, you would get the quarterly and annual returns.[sociallocker]
Why you should calculate portfolio Returns?
- Most people investing in stock market believe that they are generating returns which are superior to markets or fund managers. You cannot compare this until you have your portfolio returns with you.
- The return calculation would help you make better judgment while choosing next investment.
- The return would tell you if you are at the right investment path.