One of the most important requirements of anyone investing in the stock market is to have an accurate view of how their portfolio is performing.
As part of the latest improvements to our folio tools we've introduced powerful and hugely useful new time-weighted return performance view that shows you exactly how your portfolio is doing. These charts automatically adjust your returns for the impact of cash inflows and outflows over time - giving you a true reflection of your underlying investment performance.
A new performance chart that isn't distorted by cash
Calculating portfolio performance over time should, in theory, be as simple as comparing the start value to the end value. But for that calculation to be right, you'd need to invest a single pot of money and then leave it untouched. But that's not what most investors do...
More typically, cash tends to be added periodically to build positions and buy new ones, and may be withdrawn occasionally for any number of reasons.
The problem is that these deposits and withdrawals change the absolute value of your portfolio and make it impossible to directly compare the start and end values. That makes it difficult to appraise your investment decisions and rate your performance against a benchmark or the returns of other investors.
Until now, Stockopedia's valuation charts haven't done a good enough job of reflecting the true nature of a portfolio’s performance. By depositing or withdrawing cash after the portfolio start date, the chart would spike upwards or downwards - which was very frustrating.
Just take a look at the valuation chart of the Stockopedia Investment Club over the past year or so to see the impact. Cash inflows have skewed the real performance. As much as we're striving to beat the market, we're nowhere near 300% up.
The portfolio valuation has climbed because of regular cash deposits, and not because of our superior stock picking abilities. This is where the new time-weighted return performance charts solve some real headaches that we know have been troubling our users, as well as us.
Professional-grade performance calculations over any timeframe
In order to produce an accurate performance chart, the new system uses an industry standard time-weighted return methodology. It's this that means you can now fairly compare your investment performance over any…
