- What Is the Purpose of the Performance Module?
- What Accounts Are Included in the Performance Module?
- What Is Personal Rate of Return?
- How Is the Personal Rate of Return Calculated?
- Can You Explain the Net Investment vs. Market Value Chart?
- Can You Explain the Activity Summary?
- What Is Test Portfolio Changes?
- How Do I Add Other T. Rowe Price Funds to My Test Portfolio Changes Analysis?
- What Is Asset Allocation?
The information in this module is intended to assist you in tracking the historical growth of your mutual fund investments over time. The module consists of three components in tracking the historical growth of your mutual fund investments over time. The module consists of three components that allow you to visualize your performance—Personal Rate of Return, Net Investment vs. Market Value, and Activity Summary.
Performance only includes T. Rowe Price retail mutual fund assets. Assets that you hold in Brokerage, College Savings Plan (529 Plans), variable annuity portfolios, and workplace retirement accounts are not included. Activity in your active account(s) prior to January 1, 1992 is also not included. Activity in accounts closed since January 1, 2005 may be included.
Personal Rate of Return is a person's own investment performance based on his or her transaction history and resulting cash flows. The growth of your portfolio is based upon both the performance of your mutual funds and the timing and amount of your transactions. Therefore, your personal rate of return may differ significantly from the performance of the mutual funds that make up your portfolio. This is because the performance of the mutual funds held in your portfolio only includes the change in the fund's share price and any reinvested dividends and capital gain distributions, whereas you may have placed purchase or redemption transactions during the period. In addition, price or transaction corrections for previously declared values that were posted after the calculation date may not be reflected in the results.
The growth of your portfolio should be monitored over an extended period of time. Also, keep in mind that your portfolio may perform differently in the future than in the past. Past performance cannot guarantee future results. Before making changes to your portfolio there are several other factors that should be considered, such as your investment objectives, your tolerance for risk, and your time horizon.
Personal rate of return is a person's own investment performance based on his or her transaction history and resulting cash flows, minus any fees. Your personal rate of return was calculated using a "time-weighted rate of return" method. Time-weighted rates of return take into account the amount of time an investor has been invested in a certain security such as a stock or mutual fund. It measures how well the investor performed in increasing the dollars that were invested and provides a truer measurement of how investments have performed. Cash flows such as purchases and redemptions of fund shares do not affect the time-weighted rate of return. In addition, the price or transaction corrections for previously declared values that are posted after the calculation date may not be reflected in the results. Other approaches to calculating personal rate of return exist and could yield different results.
To be exact, your personal rate of return was calculated on a daily basis using the time-weighted rate of return "Daily Valuation Method." The actual valuation of a holding/position each time there is an external cash flow will result in the most accurate time-weighted rate of return calculation. In practice, this can only be met by having the ability to obtain daily valuations on all portfolio holdings on a continuous basis. Returns are calculated under these conditions using the "Daily Valuation Method." This method calculates the true time-weighted rate of return (TWRR). The Daily Valuation Method breaks the total performance period into sub-periods, the boundaries of which are based on the occurrence of cash flows. The formula for calculating a sub-period return is…
...where Ending Market Value (EMV) is the market value of the portfolio at the end of the sub-period before any cash flows in this period, but including accrued income for the period. Beginning Market Value (BMV) is the market value at the end of the previous sub-period (i.e., the beginning of the current sub-period), including any cash flows at the end of the previous sub-period and accrued income up to the end of the previous period.
The sub-period returns (e.g., R1, R2, R3) are then geometrically linked according to the following formula…
…where Rtr is the total return and R1, R2…Rn are the sub-period returns for sub-period 1 through n, respectively. Sub-period 1 extends from the first day of the overall period up to and including the date of the first cash flow (excluding the value of that cash flow but including all accrued income for that sub period). Sub-period 2 begins the next day and extends to the date of the second cash flow (again, excluding the value of that cash flow but including accrued income), and so forth. The final sub-period extends from the day of the final cash flow through the last day of the overall period. This method assumes that the cash flow is not available for investment until the beginning of the next day. Accordingly, when the portfolio is revalued on the date of a cash flow, the cash flow is not reflected in the Ending Market Value, but is added to the Ending Market Value to determine the Beginning Market Value for the next day.
Your net investment, represented by the orange line in the chart, consists of the money that you have invested and withdrawn from your mutual fund accounts over the specified time period. Income proceeds are not included. At the beginning of the time period, the beginning value, net investment, and market value are all equal.
Your market value, represented by the blue line in the chart, is the number of shares held (which includes any purchases and sale and reinvested income) multiplied by the share price. At the beginning of the time period, the market value is equal to the net investment. At the end of the time period, the market value is equal to the ending value. Periods of gains, where your market value is greater than your net investment, are shaded in green, while periods of losses, where your market value is less than your net investment, are shaded red.
This activity summary summarizes the key activities for the mutual fund account(s) included in the analysis for the specified time period. Here is a definition for each of the items in the activity summary:
- Beginning Value—The beginning value is the total dollar value of all accounts included in the analysis for the beginning date chosen.
- Additions—Additions reflect any transactions to move money into your account(s) such as the purchase of new shares, exchanges into a fund, transfers from any other accounts, and dividends invested in an account from another account. It does not include income or market fluctuations.
- Deductions—Deductions reflect any transactions to move money out of your account(s), including redemptions, exchanges out of a fund, transfers to other accounts, or checkwriting activity. Any applicable redemption fees are also included in the deduction amount. Proceeds from any income that is not reinvested in the same account (cash dividends paid to you and dividends invested into another account) are also reflected as a deduction.
- Income—Income is any proceeds (cash or reinvested dividends, short- and long-term capital gain distributions) earned in your accounts. Income that is not reinvested in the same account (cash dividends paid to you and dividends invested into another account) is reflected as a deduction.
- Market Fluctuation—Market fluctuation is any increase or decrease in the value of your accounts over the period selected caused by the changes in the mutual funds' beginning and ending share prices (net asset values). If all of your holdings are money market funds, there should be no change in value due to market fluctuation, although this is not guaranteed.
- Ending Value—Ending value is the total dollar value of all accounts included in the analysis for the ending date chosen.
- Change in Value—Change in value is the dollar value difference between the beginning value and the ending value for the specified time period.
Test Portfolio Changes is a tool you can use to analyze your T. Rowe Price mutual fund and brokerage holdings, along with any new or other external holdings you wish to include. The results are broken down into three categories: Asset Allocation, Risk/Reward, and Morningstar X-Ray®.
You have the option to include additional T. Rowe Price funds in your Test in a Portfolio analysis. This feature allows you to select potential additions to your portfolio from our more than 90 no-load funds, enter an amount, and see the resulting portfolio analysis before you transact.
Asset allocation allows you to view how your portfolio is divided among the three main asset classes: stock, bond, and money market funds. Asset allocation is an important indication of how well your portfolio is diversified. Bear in mind that your optimal stock/bond/money market mix-or asset allocation-will be a moving target, as you should adjust your asset allocation toward conservative investments as you move closer to retirement or any other savings goal.