What is the P&L Rate of Return？
The P&L rate of return is the ratio of cumulative profit to initial cost over a period of time. A simple way to calculate it is:
RoR=(Ve/Vs-1)*100%
*Ve & Vs refer to ending value and starting value.
However, this method is not valid if the user makes frequent deposits and withdrawals during the investment period. For example, if a user's starting value of total assets is $10,000, then they deposit $5,000 and don't make any trades, their end value of total assets becomes $15,000. According to the simple method, the rate of return of their portfolio is ($15,000/$10,000-1)*100%=50%. However, the user didn't make any investment. The reason for this outcome is because the simple method doesn't take the user's deposits & withdrawals into consideration.
Tiger's P&L Rate of Return Calculation
Time-Weighted Return
Tiger adopts the most common prevailing method--Time Weighted Method (TWR). First, calculate the value-weighted rate of return per unit time, then calculate the geometric mean of each day's rate of return over the entire time interval. Tiger assumes that the deposits on a particular day participate in the transactions on the same day, and are included in the assets at the beginning and the end of the period. Meanwhile, Tiger also assumes that withdrawals on a particular day don't participate in the transactions on that same day, and are only included in the end value of total assets. The calculation is as follows:
T's RoR=(Ve-Vs-(Cd+Cw))/(Vs+Cd)
Time Weighted RoR=(1*(1+Rt1)*(1+Rt2)*...*(1+Rtn)-1)*100%
* Ve & Vs refer to ending value and starting value. Cd & Cw refer to external cash flows such as deposits, withdrawals, stock transfers etc.
For example:
Date | End Value of the Day（V） | Cd | Cw | T's RoR |
1/12 | 50,000 | - | ||
2/12 | 70,000 | 12,000 | 12.90% | |
3/12 | 65,000 | -2,000 | -4.29% | |
4/12 | 72,000 | 11,000 | -3,000 | -1.32% |
5/12 | 80,000 | 11.11% |
12/2's RoR= （70,000-50,000-12,000）/(50,000+12,000)*100%=12.90%
12/3's RoR=（65,000-70,000-(-2000))/70,000*100%=-4.29%
12/4's RoR=（72,000-65,000-(11,000-3,000))/(65,000+11,000)*100%=-1.32%
And so on, calculate each day's rate of return from December 1st to December 5th, and then calculate the time-weighted rate of return from December 1st to December 5th.
R=（1*(1+12.90%)*(1-4.29%)*(1-1.32%)*(1+11.11%)-1)*100%=18.49%
Money-Weighted Return
The Money-Weighted Return method (MWR) adjusts the contribution of cash flows within a period to the return, providing a more reasonable reflection of the impact of cash flows. Compared to the TWR, the Money-Weighted Return method is more suitable for estimating the actual return of individual investors. The calculation formula is as follows:
RoR = Cumulative P&L for the period / [Initial Total Assets + ∑(Net Cash Flow * Time Weight)]
Where:
Time Weight = 1 - (Days of Cash Flow / Total Days in the Period)
Example:
Date | End Value of the Day（V） | Cd | Cw | Daily P&L | Time Weight | Net Cash flow*Time Weight |
1/12 | 50,000 | 0 | ||||
2/12 | 70,000 | 12,000 | 8000 | 0.75=1-(1/4) | 9000 | |
3/12 | 65,000 | -2,000 | -3000 | 0.5=1-(2/4) | -1000 | |
4/12 | 72,000 | 11,000 | -3,000 | -1000 | 0.25=1-(3/4) | 2000 |
5/12 | 80,000 | 8000 | 0 |
And so on, calculate the Money-Weighted Rate of Return from December 1st to December 5th.
R = (8000-3000-1000+8000)/(50000+9000-1000+2000) = 20.00%
Simple Dietz Return
The Simple Dietz Return method is a straightforward way to calculate returns, suitable for cases where cash flows are relatively stable or the investment period is short. Compared to the MWR method, it does not consider the time weighting of cash flows and assumes that all cash flows occur in the middle of the investment period. The calculation is relatively simple but approximate. The formula is as follows:
RoR = Cumulative P&L for the period / [Initial Total Assets + ∑(Net Cash Flows * Time Weight)]
Where:
The time weight for each cash inflow/outflow is fixed at 0.5.
Example:
Date | End Value of the Day（V） | Cd | Cw | Daily P&L | Time Weight | Net Cash flow*Time Weight |
1/12 | 50,000 | 0 | ||||
2/12 | 70,000 | 12,000 | 8000 | 0.5 | 6000 | |
3/12 | 65,000 | -2,000 | -3000 | 0.5 | -1000 | |
4/12 | 72,000 | 11,000 | -3,000 | -1000 | 0.5 | 4000 |
5/12 | 80,000 | 8000 | 0 |
And so on, calculate the Simple Dietz Rate of Return from December 1st to December 5th.
R = (8000-3000-1000+8000)/(50000+6000-1000+4000) = 20.34%
Q&A
Is the data of the account analysis page updated in real-time?
To better help users have a comprehensive overview of the latest asset trends, the account analysis page provides real-time data analysis for total assets, asset trends, P&L analysis, P&L calendar and other functions.
Total Assets: real-time data updated every minute and displayed in the selected currency after conversion based on real-time exchange rates.
Asset trends, p&l analysis and p&l calendar and others:
Today/Last 5 days: display real-time data; updated every 5 minutes. The real-time asset's cut-off time is 9:00 am in Beijing Time/Sydney Time/Wellington Time.
Other time periods or customised time intervals: the settled dates display the data after settlement (consistent with the data of statements) and are updated daily. The unsettled dates adopt real-time data and will be updated after settlement.
*Due to the different cut-off times, there may be inconsistencies between the real-time asset data displayed for Today/Last 5 days and the statement's data. Please refer to the statement's data for accuracy. The update frequency of the data display is for reference only. Please be aware of the actual.
Why is the daily P&L on the portfolio page different from that on the account analysis page?
Different data scope: the daily P&L on the portfolio page only contains current holding investments' P&L, while the daily P&L on the account analysis page includes not only the P&L of the current holdings but also the changes of total assets caused by interest deductions and other factors.
Different data period: the daily P&L of the portfolio page is calculated from 0:00 am local time of each exchange and summed up based on real-time exchange rates, while the daily P&L on the account analysis page is calculated based on the real-time asset's cut-off time, which is 9:00 am in Beijing Time/Sydney Time/Wellington Time.
Why is there a discrepancy between the rate of return calculated by myself and Tiger, is it wrong?
The rate of return is used as a reference indicator for analysing investment performance. There are several commonly used calculations like ROI, time-weighted, IRR, analyst test, etc. Different assets and different investment scenarios may apply different yield calculation methods. Among all these methods, the time-weighted method adopted by Tiger is one of the most prevailing methods used by various investment institutions and evaluators to measure the investment performance of investment managers. In the absence of external cash flow impact, the results of each formula should be consistent. When affected by external cash flow (deposits, withdrawals, transfer of shares, etc.), the results of various formulas may deviate. In special cases, the deviation will be relatively large, mainly due to different assumptions about time, capital, or assets' return processing methods. Users can also calculate their ROI based on their own formulas.
Why are the signs of my total P&L and RoR calculated by Tiger opposite？
The time-weighted calculation adopted by Tiger has the same weight for all time periods regardless of the investment amount. Therefore, when the user invests a large proportion of funds to make profits or losses, the impact on the total P&L is relatively larger than the time-weighted return. Under special circumstances, there may be asymmetry of signs. We recommend trying a different calculation method.
If you have questions about RoR, please contact us for assistance.