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1.
Why might your personal returns in a fund not match the fund's reported returns?
You didn't invest in the fund at the start of the period that the reported returns cover. Reported returns are based on lump-sum investments over specific time periods. If you use dollar-cost averaging or if you invest in a fund at any other time than at the start of the period, your personal returns will differ from the reported ones.
2.
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.
3.
Your personal returns in a fund would not match the fund's reported returns if you were investing your money on a different schedule from the one the fund assumed.
True. Reported returns assume lump-sum investments at certain times, such as the first of the year. But if you are investing money throughout the year, your return will differ from the reported return.
4.
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.
5.
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.
