Investment performance is the

return Return may refer to: In business, economics, and finance * Return on investment (ROI), the financial gain after an expense. * Rate of return, the financial term for the profit or loss derived from an investment * Tax return, a blank document or t ...

on an investment portfolio. The investment portfolio can contain a single asset or multiple assets. The investment performance is measured over a specific period of time and in a specific currency. Investors often distinguish different types of return. One is the distinction between the

total return The total return on a portfolio of investments takes into account not only the capital appreciation on the portfolio, but also the income received on the portfolio. The income typically consists of interest, dividends, and securities lending fees. ...

and the

price return The price return is the rate of return on an investment portfolio, where the return measure takes into account only the capital appreciation of the portfolio, while the income generated by the assets in the portfolio, in the form of interest and ...

, where the former takes into account income (

interest In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct ...

and

dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...

s), whereas the latter only takes into account capital appreciation. Another distinction is between net and gross return. The 'pure' net return to the investor is the return inclusive of all fees, expenses, and taxes, whereas the 'pure' gross return is the return before all fees, expenses, and taxes. As a result, gross returns will be greater than net returns. Various variations between these two extremes exist. Which return one looks at depends on what one is trying to measure. For example, if one wishes to measure the ability of an investment manager to add value, then the return net of transaction expenses, but gross of all other fees, expenses, and taxes is an appropriate measure to look at since fees, expenses, and taxes other than transaction expenses are often outside the control of the investment manager. Another important distinction is between the money-weighted return and the

time-weighted return The time-weighted return (TWR) is a method of calculating investment return. To apply the time-weighted return method, combine the returns over sub-periods by compounding them together, resulting in the overall period return. The rate of return over ...

. The former is appropriate if the manager determines the timing of inflows in or outflows from the portfolio. The latter is appropriate when the manager is not responsible for the timing of cash inflows into and cash outflows from the portfolio.

See also

Further reading