<p>Measuring the performance of your portfolio can be a little tricky in practice. Having experimented with a few methods, I&#8217;ve now settled on a mixture of Google Sheets to provide an up-to-date valuation and a simple unitisation calculation to measure my portfolio performance.</p>
<p><!--more-->It&#8217;s not a fully automated process, but as measuring your portfolio performance is something you might only do each month, quarter or year, it shouldn&#8217;t be too onerous.</p>
<p>Using this method, you also need to do a valuation whether you add or remove cash from any of your investment accounts, so that might increase your workload a little depending on your investment strategy. I think of it as an added incentive to reinvest your dividends rather than spending them!</p>
<h2>Why measure at all?</h2>
<p>In my case, it is to answer the question &#8220;have I beaten the market?&#8221; and the follow up of &#8220;do I need to change my investing strategy?&#8221;</p>
<p>I have some passive funds, but most of my holdings are active (indeed pretty much all investment trusts are actively managed). <a href="https://www.evidenceinvestor.co.uk/evidence/">All the evidence points towards</a> the fact that the vast majority of active funds don&#8217;t beat their benchmarks over time. So, by choosing the active route, you are explicitly making the statement that your own portfolio performance can beat that of the market. You think you can be the exception. Some people might say you&#8217;re full of it.</p>
<p>In my case, I have to admit I also enjoy the intellectual challenge of picking different funds and all the analysis that comes along with it. But, were I to find that over a decent period of time that my portfolio performance was lacking, I&#8217;m hoping that I wouldn&#8217;t be too proud to admit defeat and put all my cash in <a href="https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products">global trackers and lifestyle funds</a>.</p>
<h2>Enter Google Sheets</h2>
<p>Portfolio tools on various websites seem to come and go. And while they can tell you what investments are worth, they don&#8217;t tend to track your portfolio performance very well.</p>
<p>For a while I&#8217;m been using Google Sheets, rather a website-based portfolio tool. It&#8217;s free and you can build other tables of financial information around it as you see fit.</p>
<p>Google Sheets is very similar to Excel in many ways. With the Google Finance function it&#8217;s pretty simple to build your own portfolio tool. You can then add extra information, such as dividends and position sizes as a percentage of your portfolio.</p>
<p>Here&#8217;s a screenshot showing some information for a couple of investment trusts that I hold.</p>
<p><a href="http://www.itinvestor.co.uk/wp-content/uploads/2018/08/Google_Sheets_portfolio_1.png"><img class="alignnone wp-image-400 size-large" src="http://www.itinvestor.co.uk/wp-content/uploads/2018/08/Google_Sheets_portfolio_1-600x172.png" alt="Screenshot of Google Sheet to measure portfolio performance" width="600" height="172" /></a></p>
<p>And here are the formulas I&#8217;ve used to create that.</p>
<p><a href="http://www.itinvestor.co.uk/wp-content/uploads/2018/08/Google_Sheets_portfolio_2.png"><img class="alignnone wp-image-401 size-large" src="http://www.itinvestor.co.uk/wp-content/uploads/2018/08/Google_Sheets_portfolio_2-600x167.png" alt="Screenshot of Google Sheet to measure portfolio performance, showing formulas" width="600" height="167" /></a></p>
<p>You should be able to click on these images to enlarge them. You just need to enter the number of shares and the expected or historical dividend per share (columns F and H in my example) and the spreadsheet should do the rest.</p>
<p>There are loads of different Google Finance attributes you can use rather than price, although I&#8217;ve found many of them only have data for US stocks. But for the simple purpose of tracking your portfolio&#8217;s value and income, it should suffice.</p>
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<h2>What to compare your portfolio performance to?</h2>
<p>I think the main choice here is whether to measure your portfolio performance against the UK market (with an index like the FTSE All-Share) or the global (something like FTSE All-World or MSCI World). For simplicity, I use the UK market for now, but I suspect I might add a global index soon as well, as that better reflects my portfolio.</p>
<p>One thing to watch out for is that most indices are quoted without the returns from dividends. So, you need to look for the Total Return versions to make a proper comparison. One of the reasons I measure myself against the UK market is the relative ease of getting the <a href="http://www.ftse.com/products/indices/uk">Total Return values</a> for the FTSE All-Share. It&#8217;s worth noting that most Total Return indices are only updated after the close of each day.</p>
<h2>Setting up the unit calculations</h2>
<p>These are actually pretty simple. Once you have decided on an index to compare yourself against you can set up a spreadsheet. In the tables that follow the figures in red are the ones being calculated from the other variables.</p>
<table id="iti">
<tbody>
<tr>
<th>Date</th>
<th style="text-align: right;">Portfolio value</th>
<th style="text-align: right;">Unit price</th>
<th style="text-align: right;">Units</th>
<th style="text-align: right;">Index</th>
<th style="text-align: right;">Index price</th>
</tr>
<tr>
<td>1 Jan 2018</td>
<td style="text-align: right;">£125,000</td>
<td style="text-align: right;">100.00</td>
<td style="text-align: right;"><span style="color: #ff0000;">1,250.00</span></td>
<td style="text-align: right;">7,265.66</td>
<td style="text-align: right;">100.00</td>
</tr>
</tbody>
</table>
<p>For ease of comparison, I set both my starting portfolio unit price and that of the index to 100.0. So the only calculation required is for the starting number of units, which is 125,000/100 = 1,250.</p>
<h2>Adding or taking out cash</h2>
<p>At the start of the tax year, let&#8217;s say I added some cash to my ISA. The first thing to do is another valuation. I get the figure from my Google Sheet and look up the latest FTSE All-Share Index Total Return value from the FTSE website.</p>
<table id="iti">
<tbody>
<tr>
<th>Date</th>
<th style="text-align: right;">Portfolio value</th>
<th style="text-align: right;">Unit price</th>
<th style="text-align: right;">Units</th>
<th style="text-align: right;">Index</th>
<th style="text-align: right;">Index price</th>
</tr>
<tr>
<td>6 Apr 2018</td>
<td style="text-align: right;">£120,712</td>
<td style="text-align: right;"><span style="color: #ff0000;">96.57</span></td>
<td style="text-align: right;">1,250.00</td>
<td style="text-align: right;">6,890.35</td>
<td style="text-align: right;"><span style="color: #ff0000;">94.83</span></td>
</tr>
</tbody>
</table>
<p>The number of units stays the same, but the new unit price is 120,712/1,250 = 96.57. A fall of 3.5% then, not a great start to the year!</p>
<p>However, the UK market has done a little worse. 6,890.35/7,265.66 = 94.83, which is a drop of 5.2%.</p>
<p>Let&#8217;s assume I added £5,000 of cash to my ISA on 6th April. Although I had that cash in my bank account, it only gets included in these calculations when I add it to an investment account.</p>
<table id="iti">
<tbody>
<tr>
<th>Date</th>
<th style="text-align: right;">Portfolio value</th>
<th style="text-align: right;">Unit price</th>
<th style="text-align: right;">Units</th>
<th style="text-align: right;">Index</th>
<th style="text-align: right;">Index price</th>
</tr>
<tr>
<td>6 Apr 2018</td>
<td style="text-align: right;">£125,712</td>
<td style="text-align: right;">96.57</td>
<td style="text-align: right;"><span style="color: #ff0000;">1,301.77</span></td>
<td style="text-align: right;">6,890.35</td>
<td style="text-align: right;">94.83</td>
</tr>
</tbody>
</table>
<p>The new number of units is 125,712 / 96.57 = 1,301.77. The unit and index prices remain unchanged.</p>
<h3>And that&#8217;s all there is to it</h3>
<p>Simply repeat this process every time you want to do a valuation or decide to add or take money out.</p>
<p>If you spend all your dividends or invest through numerous monthly schemes, then you could be making several calculations a month. I think it&#8217;s acceptable to bundle a few transactions together for the purpose of these calculations. So if you invested £500 but withdrew £750 a week later, you just count that as one withdrawal of £250. Obviously, the larger these amounts relative to the size of your portfolio, the more precise you should probably be.</p>
<p>I&#8217;ve only been using this method since 1 January 2018 and it&#8217;s been relatively painless so far. So far, I&#8217;m ahead of the market this year by 2.8%. My arrogant belief in my investing abilities remains intact! But who knows what the future holds.</p>
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Hello IT Investor.
I bumped into this page by chance. Yours is one of the rare pages that shows how one can monitor their portfolio on a real-time basis. Quick question for you: Do you also type in buy/sell/ divi reinvestments? (Not sure how the s/sheet above will cope up with that)
Thanks,
Hi Iamwhatuthinkiam,
I just use the overall valuation at any given point in time, so I don't separately account for buys, sells, or dividends as they are effectively included within my overall valuation already. So I only adjust the number of units when I add new cash to my broker account or take any money out of it.
Since I wrote this piece I've also added an IRR measure on a spreadsheet as an additional measuring point. There's a good piece by UK Value Investor on the merits of the two: https://www.ukvalueinvestor.com/2019/10/how-to-measure-your-portfolios-returns.html/
Hope that's useful.