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1.
Why does your personal rate of return matter?
Because it helps you to evaluate how your portfolio and individual funds are performing. Knowing your portfolio's actual returns can help you determine whether you're on track to meet your investment goals and whether your funds are living up to your expectations.
2.
When calculating your personal returns on a spreadsheet or financial calculator, why do you have to enter negative numbers for your contributions?
Because you're trying to figure out the internal return represented by the difference between your final balance and your beginning balance plus the money you've invested. Your returns are the gains you made on the money you invested. In other words, the returns you're calculating are for the final worth of your portfolio, minus the money you started with and invested during the year.
3.
When calculating your personal returns on a spreadsheet or financial calculator, you must enter _______ for your contributions.
Negative numbers. The returns you're calculating are for the final worth of your portfolio, minus the money you started with and invested during the year.
4.
If your personal rate of return for a fund is much lower than the return reported by your fund company, you should probably take a look at _______.
When you've been buying and selling. Your timing probably accounts for the difference.
5.
Where can you always find your personal rate of return for a fund?
Neither. Fund companies rarely include personal rates of return on documents. You'll have to calculate the number for yourself by using a financial calculator or spreadsheet program, or by entering your portfolio in an online portfolio manager.
