Originally Posted by
tsptalk
Hi AZ -
Prior balance and return make a difference and you can't add percentages. They get compounded.
Here's an extreme example to show how / why:
Account "A" started at $50K and it was up 100% before last week (=$100K), and that week it made 10% (+$10K), so the account is now $110,000 and up 120%. (60K / 50K). It went from +100% to +120% and "looks" like a gain of 20%.
Account "B" account started at $50K and it was up 20% before last week (=$60K), and that week it made 10% (+$6K), so the account is now $66,000 and up 32%. (16K / 50K). It went from +20% to +32% and "looks" like a gain of 12%.
Despite both being up 10% for the week, Account A went from being +100% to +120% (20% increase in total return.) Account B went from +20% to being up 32% (12% increase in total return.)
I hope that helps.
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