I want to calculate a couple of metrics for portfolio. However, only examples I can find over the internet do not cover portfolio rebalances. Suppose the following scenario:

  1. Jan 1st, buy portfolio for $10,000. Current portfolio value is $10,000
  2. Mar 1st, invest additional $5,000 to the same portfolio (e.g. buy more stocks). Current portfolio value is X + $5,000, where X is a changed value of previously bought actives
  3. Apr 1st, Rebalance portfolio (e.g. sell some stocks, buy other). Current portfolio value is Y

How should YTD return be evaluated at each of these time points? What about other metrics for portfolio performance?

Thanks in advance


The simplest method is to calculate the return from Jan 1 to Mar 1 (before the investment), then the gain from Mar 1 to Apr 1 (including the investment) and compounding them. This is called time-weighted return.

Say the initial balance on Jan 1 was $10,000. On Mar 1 the balance (before the investment) was $11,000. your gain for that period is thus 10% (11/10 - 1) You then added $5,000 for a new balance of $16,000. On April 1 the portfolio balance went down to $14,000 for a loss of 12.5% (14/16 - 1). Your total YTD return is then (1.1 * 0.875) - 1 = -3.75%.

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