Annualised Returns in PP 2017 Incorrect for Periods Less Than a Year

  • 1
  • Idea
  • Updated 3 years ago
The calculation of % investment returns for periods of less than one year need to be changed.

Currently monthly / weekly percentage changes are annualised.  Relatively small dollar returns frequently result in meaningless returns of 100% or 200% when annualised.  A one week gain of 5% results in a 250% annualised return.  This renders the reports USELESS.

All returns of less than one year should not be annualised so that a one week return of 5% is recorded as 5% and that a six month return of 4% is recorded as 4%.

Many of the performance reports are of NO USE AT ALL because of the incorrect annualisation of returns over periods of less than one year.

Avoiding bizarre investment returns being reported is the whole point of this post !

Bizarre (comparative) investment returns (such as 500% in 2 weeks) can be PREVENTED by calculating ABSOLUTE RETURNS for ANYTHING LESS THAN 12 MONTHS.

Annualized investment returns should be calculated for more than 12 months.

Absolute returns should be calculated for less than 12 months.

If this is done, there will not be any bizarre percentage returns.

And, the absolute returns reported will still be completely meaningful.

This change is essential to make investment return reports meaningful.  At the moment they are of no use at all.
Photo of Archie

Archie

  • 774 Points 500 badge 2x thumb
  • Very frustrated at the failure to implement essential changes.

Posted 3 years ago

  • 1

Be the first to post a reply!