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
An investor starts with € 10,000, invests € 2,000 in the first period and ends up with € 8,500, resulting in a negative return for the period of -29.3 %. In the second period, he sells for € 4,000 and the portfolio increases to € 12,000, resulting in a positive return for the period of 41.5 %. The aggregate TTWROR is almost neutral (close to 0%) or slightly negative as it takes into account the cash inflow, while the absolute return is positive at 20% due to the terminal value of €12,000.
Positive TTWROR but negative absolute return
Positive TTWROR but negative absolute return
Yes, mathematically it is possible that your TTWROR is positive and your absolute return is negative.
An investor starts with €10,000 and the portfolio increases to €12,000 in the first period, resulting in a positive period return of 20%. In the second period, the investor withdraws €5,000 (excluding transaction costs) and the portfolio value falls to €4,000, resulting in a negative return for the period of -33.3%. The TTWROR remains positive (approx. -5.6% overall) as it looks at the performance per period in isolation, while the absolute total return is negative at -60% due to the final value of €4,000 and the initial €10,000.