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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.
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.
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.
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.
5.
If your personal rates of return for a fund are significantly lower than the reported return over the same period, _______.
You may be buying and selling at inopportune times. Just because your personal rate of return is lower than a reported rate of return over a given time period doesn't mean that you won't meet your goals. It may, however, mean that you're making trades at inopportune times, thereby sabotaging your results.
