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.

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

KCLau

Personal finance author and trainer

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

• 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?

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• kevin george

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

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• 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 (Ã§ÂˆÂ±Ã§Â–Â¯)

• sherin

Can we have a link exchange?

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

contact: investinternals@gmail.com

• sherin

Excellent work and very informative. Appreciated

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• 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.

• 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.

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• Bill

Nice summary of how to calculate investment returns.

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