How can we help?

Sharesight calculates percentage returns using a dollar-weighted return methodology, also known as a money-weighted approach. This method measures investment performance by considering both the size and timing of cash flows.

The other widely used approach in performance measurement is the Time Weighted Return. In this method the effect of cash inflows and outflows is removed from the calculation. This is commonly used when evaluating fund manager performance. The reasoning behind this approach is that fund managers don't control when money flows into and out of their fund — investors control that — so it is not reasonable to include that effect when evaluating the manager.

Investors, in contrast can control the timing of when they put money in or out of the portfolio. For this reason it is widely agreed that a dollar-weighted return is the most appropriate means of measuring performance from a private investor's point of view.

How Sharesight reports your investment performance webinar

---

Understanding your returns

These concepts apply universally across your portfolio, individual holdings, and all reports in Sharesight.

Components of return

Understand how Sharesight breaks your total return into four components — capital gains, dividends, currency gain, and total return — and how each one is calculated.

Absolute and annualised return

Learn the difference between absolute return (total gain over a period) and annualised return (the equivalent yearly rate), and when Sharesight displays each one.

Simple and compound calculation

Understand how Sharesight applies simple and compound methods when calculating returns across different periods.

Opening Balance

Understand how opening balance trades work and how they affect your performance calculation.

Open Positions and Open & Closed Positions

Understand the difference between open and closed positions and how each affects the return figures shown in your portfolio.

Fresh and Recycled Capital

Understand how Sharesight distinguishes between new money added to your portfolio (fresh capital) and proceeds reinvested from sales (recycled capital), and how this affects your return calculation.

Interpreting the return index graph

Understand how the return index graph is constructed and how to read it alongside your portfolio performance.

---

Important notes

1. There are various approaches to calculating a dollar-weighted return. Different methodologies rely on different assumptions and in some cases they may yield different results. The best-known method of calculating dollar-weighted returns is the Internal Rate of Return. This produces sound results in most cases but can produce unreasonable or even multiple results in some cases, and can sometimes fail to calculate a return at all particularly when there is extreme volatility and much variation in cashflows. Sharesight instead uses a variation of the Modfied Dietz method which has proven to provide a reasonable measure of performance even with large volatility of prices and periodical cash flows. In most cases the return will be very similar to the IRR method. It is important to note however that no dollar weighted return methodology is free from limitations and therefore percentage returns should be used as a guideline and must be evaluated in the context of the chosen methodology.
2. Global Investment Performance Standards (GIPS) mandate that fund managers publish returns using time-weighted return methodology. A time weighted return differs from a dollar weighted return in that it explicitly ignores the impact of external cash flows. A time-weighted return is appropriate for measuring the performance of an investment manager on the assumption that the investment manager has limited control over when they receive funds from investors, or when the investor chooses to withdraw their funds. Sharesight's performance calculations are designed for use in evaluating the investor's portfolio rather than a manager's portfolio.

FAQs

01 - Is the percentage return always annualised in Sharesight?

All the percentage returns in Sharesight portfolios are annualised.

When viewing the portfolio, if you selected a date range less than a year or if your investment duration is less than a year, then the return percentage you see in Sharesight will be the absolute return. Another reason you might not see 'p.a' on the return percentage is when there was a substantial capital inflow into the portfolio (or holding) that would reduce the average number of years invested (AYI) to less than 12 months. For such instances the 'p.a' will be hidden.

02 - Does sharesight businessvide cumulative/absolute return?

You can only see cumulative/absolute return when the report period or invested period is less than 12 months.

03 - How is the performance calculated when an opening balance is used to record a holding?

For opening balance trades, we use the market price on the opening balance date instead of the total cost base to avoid distorting return calculations. This is because the opening balance date often doesn't reflect the exact purchase date of shares.

04 - How is the performance calculated when different date ranges are used in the portfolio overview or performance report?

Your original cost may not be considered in the performance calculation if you're using a date range that doesn't include your purchase date. When you select a specific date range, performance is calculated using the market prices at the start and end of that period. To include your actual purchase prices in the calculation, select the date range as 'since first purchase' in the investments page, holding page, or performance report.

05 - Where can I view the performance only for my sold shares?

To see the performance specifically for the shares that have been sold, refer to our sold securities report.

06 - Why is my benchmark return different from the individual holding return?

Your benchmark return could be different due to several reasons. The benchmark feature assumes that you've invested the same amount of capital during the reporting period. When you have several capital fluctuations during the report period, the benchmark feature will not take all of them to account. Due to this, it will be a fair comparison if you've had the same amount of capital invested or had minimum capital fluctuations in the portfolio or holding. If the holding has multiple buy trades, the return will be different.

Another instance is when the buy trade price is different from the market opening price. Sharesight will use the opening price of the day to calculate benchmark return. Total return percentage will be different if the buy trade price is different from the opening price of the day.

07 - Are the cash accounts included in the performance?

Our cash accounts are excluded from the performance calculation, but they are included in the total portfolio value.

08 - Why is the return in my broker account different from Sharesight?

If you are comparing your broker's performance, it may be due to the varying calculation methods used by different providers. At Sharesight, we use a dollar-weighted return method, which considers the size and timing of cash flows. For more information on why your broker's performance may differ from your Sharesight account, please refer to our blog article in this link.