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.


KCLau
KCLau

Personal finance author and trainer

    23 replies to "How to Calculate Your Investment Portfolio Return?"

    • investlah.com

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    • RockYourVote.net

      Tutorial: How to Calculate Investment Portfolio Return with Excel Spreadsheet | Personal Finance Money Tips…

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    • […] from KCLau’s Money Tips gives us a “Tutorial: How to Calculate your investment Portfolio Return.”  He gives examples of what different portfolio’s look like. And has as a excel […]

    • Bill

      Nice summary of how to calculate investment returns.

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    • gokou3

      Perhaps I have read it wrong, but I think you should also list the beginning market values and calculate weightings based on those MV.

    • KCLau

      Hi Gokou3,
      Of course you need to find out the return rate of the individual classes. About how to arrive on the return rate, it will depends on many other variables.
      Say you invest in RM10k in stock markets on Jan 1, and then review its return on Dec 31, it will be a very straight forward calculation. But I bet that in the real world, it doesn't work that way. You might buy and sell (trading), or using dollar cost averaging (different entry point). You have to calculate separately for every investment classes to come up with the appropriate return to be used in this form.
      How about real estate investment? It is not simply buy a house at RM100k, and think that it has appreciate 10% by year end. It involves rental yield, maintenance etc.
      We will talk more about calculating return for every single asset classes in the future.

    • […] presents How to Calculate Your Investment Portfolio Return? posted at KCLau’s Money Tips, saying, “Article on how to calculate investment returns […]

    • […] presents How to Calculate Your Investment Portfolio Return? posted at KCLau’s Money Tips, saying, “Article on how to calculate investment returns […]

    • […] presents How to Calculate Your Investment Portfolio Return? posted at KCLau’s Money Tips, saying, “Article on how to calculate investment returns […]

    • sherin

      Excellent work and very informative. Appreciated

    • sherin

      Can we have a link exchange?

      My blog name: Investment Internals
      URL: http://investinternals.blogspot.com

      contact: investinternals@gmail.com

    • KCLau

      Sorry that I don't exhange link at this moment. I'll probably link to
      your article when it is appropriate.

      https://www.kclau.com
      Via iphone (爱疯)

    • Link Robertson
    • […] articles:How to Calculate Your Investment Portfolio Return?Time Value of Money: Finding the Rate of Return to Meet Financial GoalsTime Value of Money: […]

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    • kevin george

      i just want to know about the calculation of return on portfolio

    • […] a Plan or what certain things you need to do. Maybe you need to increase the investment return, maybe you could actually find more property investment. Maybe you need to cover yourself with […]

    • newbie

      May I know what is the different between return and weighted return?and portfolio return as well?

      I thought adding up every return is the return rate.LOL.

      • KCLau

        Portfolio return shows the overall average return of all your investment.
        Weighted return is just a mean to calculate that, based on how big each investment class is, within your portfolio.

        • newbie

          Why can’t I add up the 4 return rates and divided by 4 to get the overall return?
          Does it make any different?Still cannot really understand on the portfolio return calculation?and did you consider the period for all the return?

          Sorry math not good.Thanks for your reply 🙂

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