Risk & returns
Investment return is the change in value over a period, including relevant income and costs under a stated convention. The period, cash flows and currency determine the calculation.
Make it click
Record the starting value, later value and anything added or taken out between them. Without separating those flows, growth can be mistaken for fresh contributions.
Now put that into markets
Price return uses price change; total return adds distributions. Time-weighted and money-weighted returns answer different questions when cash enters or leaves.
Returns can be arithmetic, cumulative, annualised, nominal or real. Compounding means multi-period returns multiply rather than simply add.
Name dates, currency, income treatment, fees and cash-flow method. Compare returns only across compatible periods and exposures.
A positive return can still fail after inflation or relative to the objective. A high historic return says nothing by itself about repeatability or risk taken.
Takeaway
