# Comparing APY to Money (or time) Weighted Return

I have a savings account with Ally and an investment account with Wealthfront. I'd like to know how the investment is doing, compared to just leaving the money in my savings account. Ally gives me an APY, while Wealthfront shows me the time- and money-weighted returns. Is there any way to compare these two numbers?

You can pretty much compare the money-weighted return and the savings account return directly since the savings account is (presumably) a constant return. The time-weighted return will just be the geometric average of the periodic returns between any cash flows, and will weight returns higher in periods that you have a higher investment balance. If you do not have any cash flows, then it should be the same as the money-weighted return.

The money-weighted return will be the equivalent constant return that you earned accounting for all cash flows. So your total return would be the same if you put it in a savings account that earned the money-weighted return of your investment portfolio.

That said, comparing a risk-free return to a risky return is not an apples-to-apples comparison. The savings account return is risk-free, meaning that there's no variation in the return. The investment return, though, could be higher or lower in different periods. You should a higher return on average for taking that risk.

try the formula `=investment_return / (DAYS(TODAY(), date_of_purchase) / 365)`

The DAYS() method returns the number of days between two dates and TODAY() will (as you might have guessed) return today's date. By dividing your return by the fraction of a year since you purchased it, this "approximates" an APY.

Keep in mind this function could be extremely misleading if the time since its purchase is small. For context, the 1-day change of the S&P 500 was +0.46% at time of posting, yielding an approximated APY of 167.9% from this formula if purchased yesterday (about three times its best ever year. source: https://fourpillarfreedom.com/heres-how-the-sp-500-has-performed-since-1928/).

• What is this the formula of? (I think you forgot something.) – RonJohn Jul 12 '19 at 23:56