A number of members have requested that we support a view of their portfolio performance including cash, and so the first phase in reflecting this has gone live on the site today. Although for the benefit of followers we have always displayed portfolio performance as if the member were fully invested (as institutional mutual funds do) , we know that many of our members make active asset allocation decisions with their cash. As such this addition should help better reflect the members’ own performance.
The calculations for portfolio performance including cash still use Time Weighted Returns, rather than the Simple Return applied by the members broker. As we have written about previously on this blog, Time Weighted Returns are a better measure for comparison between individuals.
On the site you will see a new set of calculations, and an additional performance chart, that reflects the members exposure to cash (and cash equivalents). This is available on the members fact sheet via the drop down ‘Cash and Equities’, above the performance chart. You will also see an asset allocation chart on the members holding page. Cash includes both deposited cash as well as Money Market accounts and cash sitting in other currencies. We are applying a common interest rate to all cash instruments – the US 13 week treasury bill rate (IRX)
The first version of these changes on the site will only reflect performance including cash since 28th January of this year. From the middle of May we will be extending this, where available, to include up to 18 months of cash history. At that point we will also publish an additional set of rankings on the site (to show the best performing members when taking cash into account), and auto enable new members to have a view of performance with cash from inception.
There are a couple of disclaimers with the ‘cash and equities’ figures.We calculate the “Cash and Equities” performance by weighting the daily equity return with the daily cash return based on their respective daily balances. Since we cannot determine the exact time of day that new funds are available in your account we treat all funds as being available for the trading day that they are credited to your account. In some cases the funds may have been cleared outside trading hours and in those cases we may overestimate your exposure to cash for that day.
The cash and equities view is also not supported for all members. For some brokers, such as Fidelity Netbenefits, this data is not available, and if there are significant gaps in the data record from your broker your chart may not appear. Cash is not supported initially for members manually entering their trades.
