With the update 2.40.0 we have released a completely new comprehensive performance calculation based on the so called "TTWROR" i.e. the true time weighted return.
This type of return calculation is more accurate than the normal time-weighted return, because on the one hand it considers more factors like cash flows and on the other hand it uses more variables within the calculation.
In the TTWROR, all capital inflows and outflows are completely eliminated in order to take into account deposits or disbursements in a yield-neutral manner.
Important:
Any dividends, costs and taxes are considered in getquin!
Example Calculation
Example Calculation
In simple terms, the time-weighted return applies a separate return calculation for each transaction.
An example:
You buy 10 shares on 01.01 for 100€ each
On 31.06 you buy another 10 shares for 150€
On 31.12. is a share 200€ value
Simple return:
10 * 100€ + 10 * 150€ = 2500€ total investment / 20 = average purchase price per piece 125€
20 * 125€ = 2500€ Invest
20 * 200€ = 4000€ value on 31.12
Makes a value increase of 60% with simple return.
Time weighted return:
10 * 100€ = first purchase has a cost price of 100€/piece
10 * 150€= second purchase has a cost price of 150€/piece
1st Purchase return at the end of the year:
10*100€ = EK 1000€ -> current value 2000€ = 100% return
2nd purchase return at the end of the year:
10*150€ = EK 1500€ -> current value 2000€ = 33.3'% return
Since both positions are the same size, we now calculate:
(return position 1 + return position 2) / 2 = Total time-weighted return for the portfolio = 66.6% time-weighted return.
negative TTWROR but positive absolute return
negative TTWROR but positive absolute return
Positive relative returns are also possible in combination with negative absolute returns when calculating with the time-weighted return.
To illustrate this, here is an extreme example.
Let's assume someone invests €1,000 and then achieves a return of 50%, so that their portfolio is worth €1,500.
Next, he pays in €100,000, but the market falls by 10% immediately afterwards.
This brings the total portfolio to € 91,350.
The overall performance of the portfolio is positive, as it has risen by 50% and then fallen by 10%.
In absolute terms, however, a loss of € 9,650 was achieved.
Positive TTWROR but negative absolute return
Positive TTWROR but negative absolute return
Yes, mathematically it is possible for your TTWROR to be positive and your absolute return to be negative, but here is an extreme example to illustrate this.
Let's assume someone invests €1,000 and then suffers a loss of 50% so that their portfolio is only worth €500.
He now invests €100,000 and the market rises by 10% immediately afterwards.
The total portfolio is now worth € 110,550.
The overall performance of the portfolio is negative, as it has fallen by 50 % and then risen by 10 %. However, the absolute profit is € 9,550.