Choose wisely. There is only one correct answer to each question.
0%
Keep studying!
Review your answers below to learn more.
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.
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.
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, 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.
