14 Jul 2008 | | Make Money Tips, investment | Comments feed

How to Calculate Your Investment Portfolio Return?

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Investing in various asset classes and never bother to track and monitor its return, is like flirting with several girls at the same time and never bother whom will ultimately be your wife. Don’t blindly invest and forget. It is like flirting without knowing what you will get.

You just need an extra step to calculate the return of your investment portfolio.

Let’s say you invest in several asset classes. Your gold investment gives over 100% return last year. Your stock investment turned sour after the 8th of March Malaysian general election. The apartment you rented out gives you a consistent return month after month because of your loyal tenants. Many type of investment, all with different return. So how do you know your overall investment portfolio is doing? Is it on track?

This is a simple tutorial on how to compute your portfolio return.

Return of portfolio = (W1 x R1) + (W2 x R2) + (W3 x R3) + …..(Wn x Rn)

Where W1, W2, W3 and Wn stand for the weightings in % of assets, for asset 1 to n, in the portfolio. Whereas, R1, R2, R3 and Rn are returns for the respective assets, 1 to n, in the portfolio.

Example 1:

More than half is invested in real estates.

Weight of stocks = 50k/293k = 17.06%
Weighted return of stocks = 25% x 17.06% = 4.27%
Overall portfolio return = 4.27 + 0.44 + 1.01 + 4.10 = 9.82%

Example 2:
This is a very conservative asset allocation. about 73% invested in fixed deposit.

Example 3:

This is an “balance” portfolio, invested in four asset class with equal share.

Download the excel spreadsheet: investment-portfolio-return

By tracking your portfolio return, you will be able to construct a proper asset allocation to get the desired return.

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