How is my portfolio performance calculated?

Your performance is calculated using a Time-Weighted Return methodology. This removes the impact of deposits and withdrawals in the return figures to reflect the true investment performance of the portfolio.

At what point you had the cash available to invest impacts the portfolio valuation and hence the return that you have received on it over time. Whether this was all available at the start of the period or drip fed throughout the period is relevant to the returns accredited to your investments.

In order to correctly calculate this for you, we therefore need to know when the cash was added to your portfolio to pay for subsequent purchases.

You have invested £100k over the last 2 years and your portfolio is now worth £200k.

Scenario 1

If you had £100k at the start of the 2 years, invested it and it became 200k, then the portfolio has risen by a 100% return over the two year period.

Scenario 2

Alternatively, if you had only £50k at the start of 2 years, which through investment returns became 100k after the first year and you subsequently added another extra £50k and invested with an end valuation of the same £200k ending portfolio value this would be:

(100/50)-1 = 100% return for year 1, then (200/150)-1 = 33% return for year 2

This is a 166% investment return over the two year period.

In Scenario 2, the investment returns of the portfolio were higher and so the investor's portfolio value was limited by how much he had available to invest, rather than the choice of investments.