Investing is a way of putting your money to work for you, with the hope of earning more money over time. However, investing also involves risks, such as losing some or all of your principal, or getting lower returns than expected. Therefore, it is important to track and measure your investment performance, and compare it to your goals and benchmarks.
One of the most common ways to measure investment performance is to calculate the return, which is the percentage change in the value of your investment over a given period of time. There are different types of returns, such as total return, annualized return, and year-to-date (YTD) return. In this article, we will focus on the YTD return, which is the return from the beginning of the current calendar year to the present date.
How to Calculate YTD Return
To calculate the YTD return on a portfolio, subtract the starting value from the current value and divide it by the starting value. Multiply by 100 to convert this figure into a percentage, which is more useful than the decimal format for comparisons of the returns of individual investments.
For example, suppose you have a portfolio of stocks and bonds worth $10,000 on January 1, 2024. On February 6, 2024, the portfolio is worth $10,500. The YTD return is:
($10,500 - $10,000) / $10,000 x 100 = 5%
This means that your portfolio has increased by 5% since the beginning of the year.
How to Track YTD Return on TD Ameritrade
If you have an account with TD Ameritrade, you can easily track your YTD return on their website or mobile app. Here are the steps to follow:
- Log in to your account and go to the My Account tab.
- Click on the Positions subtab to see the list of your holdings and their current values.
- Click on the Gain/Loss subtab to see the details of your gains and losses for each holding and for your entire portfolio.
- Under the Gain/Loss subtab, you can choose to view your returns by different time periods, such as 1 day, 1 month, 3 months, 1 year, or YTD.
- Select the YTD option to see your YTD return for each holding and for your entire portfolio. You can also see the dollar amount of your YTD gain or loss, and the cost basis of your holdings.
Alternatively, you can also view your YTD return on your monthly statement, which you can access online or receive by mail. Your statement will show your account summary, including your beginning balance, ending balance, deposits and withdrawals, income and expenses, and net change. It will also show your YTD return for your entire portfolio, as well as the YTD return for each asset class, such as stocks, bonds, mutual funds, etc.
How to Use YTD Return for Investment Analysis
YTD return is a useful metric for assessing your portfolio performance and comparing it to your goals and benchmarks. For example, you can use YTD return to:
- Evaluate how well your portfolio is meeting your expected return or target return, which is the return you need to achieve your financial objectives, such as retirement, education, or buying a house.
- Compare your portfolio performance to a benchmark, such as an index, a fund, or a peer group, to see how well your portfolio is doing relative to the market or to other investors with similar risk profiles.
- Identify the strengths and weaknesses of your portfolio, such as which holdings are contributing the most or the least to your YTD return, and whether you need to rebalance your portfolio to maintain your desired asset allocation and risk level.
- Adjust your portfolio strategy, such as adding or removing holdings, changing your asset allocation, or shifting your risk exposure, to improve your YTD return or to align it with your goals and benchmarks.
Limitations of YTD Return
While YTD return is a helpful measure of investment performance, it also has some limitations that you should be aware of. For example:
- YTD return does not account for the seasonality of revenue and earnings, which may affect the performance of some sectors or industries more than others. For example, the retail sector may earn more revenue in the fourth quarter due to the holiday season, while the energy sector may be affected by the fluctuations in oil prices throughout the year.
- YTD return does not reflect the volatility or risk of your portfolio, which is the degree of variation in your returns over time. A portfolio with a high YTD return may also have a high volatility, meaning that it may experience large swings in value, both up and down. A portfolio with a low YTD return may have a low volatility, meaning that it may have more stable and consistent returns.
- YTD return does not capture the long-term performance of your portfolio, which may be more relevant for your financial goals and planning. A portfolio with a high YTD return may not necessarily have a high long-term return, and vice versa. Therefore, it is important to also look at your returns over longer time periods, such as three years, five years, or ten years, to get a better sense of your portfolio trend and performance.
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