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Thread: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

  1. Default What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    According to the TSP website, the Personal Investment Performance (PIP) is: "a time-weighted return that has been calculated using the Modified Dietz method (a method used by many financial institutions and an industry standard)."


    The formula for the Modified Dietz Method is as follows:


    Rate of Return = (EMV - BMV - C)/(BMV + WC)


    EMV: Ending Market Value (Ending Balance)
    BMV: Beginning Market Value (Beginning Balance)
    C: Sum of all cash flows during period
    WC: Sum of all time-weighted cashflows


    The following table shows my TSP activity for the 2016 calendar year:


    Code:
    Date              Description               Cash Flows        Time-Weighted Cash Flows
    12/31/2015        Beginning Balance         $56,052.27
    
    
    1/14/2016         Agency Automatic (1%)         $28.58         27.48677596
    1/14/2016         Agency Match (4%)            $114.31         109.9374863
    1/14/2016         Employee Contribution        $693.00         666.4918033
    1/15/2016         Loan Payment                 $169.03         162.102541
    1/28/2016         Agency Automatic (1%)         $30.05         27.7510929
    1/28/2016         Agency Match (4%)            $120.19         110.9951366
    1/28/2016         Employee Contribution        $693.00         639.9836066
    1/29/2016         Loan Payment                 $169.03         155.6369126
    2/11/2016         Agency Automatic (1%)         $30.05         26.60163934
    2/11/2016         Agency Match (4%)            $120.19         106.3977049
    2/11/2016         Employee Contribution        $693.00         613.4754098
    2/12/2016         Loan Payment                 $169.03         149.1712842
    2/25/2016         Agency Automatic (1%)         $30.76         26.05355191
    2/25/2016         Agency Match (4%)            $123.04         104.2142077
    2/25/2016         Employee Contribution        $693.00         586.9672131
    2/26/2016         Loan Payment                 $169.03         142.7056557
    3/10/2016         Agency Automatic (1%)         $30.76         24.87693989
    3/10/2016         Agency Match (4%)            $123.04         99.50775956
    3/10/2016         Employee Contribution        $693.00         560.4590164
    3/11/2016         Loan Payment                 $169.03         136.2400273
    3/24/2016         Agency Automatic (1%)         $30.76         23.70032787
    3/24/2016         Agency Match (4%)            $123.04         94.80131148
    3/24/2016         Employee Contribution        $693.00         533.9508197
    3/28/2016         Loan Payment                 $169.03         128.3889071
    4/7/2016          Agency Automatic (1%)         $30.76         22.52371585
    4/7/2016          Agency Match (4%)            $123.04         90.09486339
    4/7/2016          Employee Contribution        $693.00         507.442623
    4/8/2016          Loan Payment                 $169.03         123.3087705
    4/21/2016         Agency Automatic (1%)         $30.76         21.34710383
    4/21/2016         Agency Match (4%)            $123.04         85.3884153
    4/21/2016         Employee Contribution        $693.00         480.9344262
    4/22/2016         Loan Payment                 $169.03         116.8431421
    5/5/2016          Agency Automatic (1%)         $30.76         20.1704918
    5/5/2016          Agency Match (4%)            $123.04         80.68196721
    5/5/2016          Employee Contribution        $693.00         454.4262295
    5/6/2016          Loan Payment                 $169.03         110.3775137
    5/19/2016         Agency Automatic (1%)         $30.76         18.99387978
    5/19/2016         Agency Match (4%)            $123.04         75.97551913
    5/19/2016         Employee Contribution        $693.00         427.9180328
    5/20/2016         Loan Payment                 $169.03         103.9118852
    6/2/2016          Agency Automatic (1%)         $30.76         17.81726776
    6/2/2016          Agency Match (4%)            $123.04         71.26907104
    6/2/2016          Employee Contribution        $693.00         401.4098361
    6/3/2016          Loan Payment                 $169.03         97.44625683
    6/16/2016         Agency Automatic (1%)         $30.76         16.64065574
    6/16/2016         Agency Match (4%)            $123.04         66.56262295
    6/16/2016         Employee Contribution        $693.00         374.9016393
    6/17/2016         Loan Payment                 $169.03         90.98062842
    6/30/2016         Agency Automatic (1%)         $30.76         15.46404372
    6/30/2016         Agency Match (4%)            $123.04         61.85617486
    6/30/2016         Employee Contribution        $693.00         348.3934426
    7/1/2016          Loan Payment                 $169.03         84.515
    7/14/2016         Agency Automatic (1%)         $30.76         14.28743169
    7/14/2016         Agency Match (4%)            $123.04         57.14972678
    7/14/2016         Employee Contribution        $693.00         321.8852459
    7/15/2016         Loan Payment                 $169.03         78.04937158
    7/28/2016         Agency Automatic (1%)         $30.76         13.11081967
    7/28/2016         Agency Match (4%)            $123.04         52.44327869
    7/28/2016         Employee Contribution        $693.00         295.3770492
    7/29/2016         Loan Payment                 $169.03         71.58374317
    8/11/2016         Agency Automatic (1%)         $30.76         11.93420765
    8/11/2016         Agency Match (4%)            $123.04         47.7368306
    8/11/2016         Employee Contribution        $693.00         268.8688525
    8/12/2016         Loan Payment                 $169.03         65.11811475
    8/25/2016         Agency Automatic (1%)         $30.76         10.75759563
    8/25/2016         Agency Match (4%)            $123.04         43.03038251
    8/25/2016         Employee Contribution        $693.00         242.3606557
    8/26/2016         Loan Payment                 $169.03         58.65248634
    9/8/2016          Agency Automatic (1%)         $30.76         9.580983607
    9/8/2016          Agency Match (4%)            $123.04         38.32393443
    9/8/2016          Employee Contribution        $693.00         215.852459
    9/9/2016          Loan Payment                 $169.03         52.18685792
    9/22/2016         Agency Automatic (1%)         $30.76         8.404371585
    9/22/2016         Agency Match (4%)            $123.04         33.61748634
    9/22/2016         Employee Contribution        $693.00         189.3442623
    9/23/2016         Loan Payment                 $169.03         45.72122951
    10/6/2016         Agency Automatic (1%)         $30.76         7.227759563
    10/6/2016         Agency Match (4%)            $123.04         28.91103825
    10/6/2016         Employee Contribution        $693.00         162.8360656
    10/7/2016         Loan Payment                 $169.03         39.25560109
    10/20/2016        Agency Automatic (1%)         $30.76         6.051147541
    10/20/2016        Agency Match (4%)            $123.04         24.20459016
    10/20/2016        Employee Contribution        $693.00         136.3278689
    10/21/2016        Loan Payment                 $169.03         32.78997268
    11/3/2016         Employee Contribution        $693.00         109.8196721
    11/3/2016         Agency Automatic (1%)         $30.76         4.874535519
    11/3/2016         Agency Match (4%)            $123.04         19.49814208
    11/4/2016         Loan Payment                 $169.03         26.32434426
    11/17/2016        Employee Contribution        $693.00         83.31147541
    11/17/2016        Agency Automatic (1%)         $30.76         3.697923497
    11/17/2016        Agency Match (4%)            $123.04         14.79169399
    11/18/2016        Loan Payment                 $169.03         19.85871585
    12/1/2016         Employee Contribution        $693.00         56.80327869
    12/1/2016         Agency Automatic (1%)         $30.76         2.521311475
    12/1/2016         Agency Match (4%)            $123.04         10.0852459
    12/2/2016         Loan Payment                 $169.03         13.39308743
    12/15/2016        Employee Contribution        $693.00         30.29508197
    12/15/2016        Agency Automatic (1%)         $30.76         1.344699454
    12/15/2016        Agency Match (4%)            $123.04         5.378797814
    12/16/2016        Loan Payment                 $169.03         6.927459016
    12/29/2016        Employee Contribution        $675.00         3.68852459
    12/29/2016        Agency Automatic (1%)         $30.76         0.168087432
    12/29/2016        Agency Match (4%)            $123.04         0.672349727
    12/30/2016        Loan Payment                 $169.03         0.461830601
    
    
    Totals:                                     $26,375.55         12742.39003
    
    
    12/31/2016        Ending Balance            $89,854.59

    Therefore, the Personal Investment Performance should be:

    Code:
    PIP = (EMV - BMV - C)/(BMV + WC)
        = ($89,854.59 - $56,052.27 - $26,375.55) / ($56,052.27 + $12,742.39)
        = 7426.77 / 68794.66
        = 0.10795562
    So, if I'm calculating 10.795562%, why does it say on the TSP website and on my
    quarterly statement that my Personal Investment Performance for the last twelve
    months ending 12/31/2016 is 9.87%? This is very frustrating, as I have found no
    way to determine exactly how the Thrift Savings Plan website comes up with that
    number. Help!


  2.  
  3. #2

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    Wow, that is sure over my head. How did you arrive at the Time-Weighted cash flow? Is that info. on our quarterly statement?

    The only thing I can suggest is to make sure your data covers the same time period as our TSP site. TSP calculates our 12 month PIP monthly, not annually, so if you check the figures today it will include values from Jan & Feb 2017 not 2016.

    That's why I check mine in early Jan to get the annual return and it matches pretty close to what I've computed in the TSPTalk spreadsheet.
    Allocations as of COB Dec 28 : 100% S. | Retirement Date:Dec 2025
    Past Returns:
    2020 31.85%,2019 27.97%,2018 -3.36%,2017 13.10%, 2016 -1.79%, 5Yr Avg 12.61%

  4.  
  5. #3

    Join Date
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    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    As Cactus said, your PIP is a month to month rolling 12-month period. If you talking about your PIP this month, it runs from the end of Feb in 2016 to the end of Feb in 2017, not Jan thru Dec of 2016. You're PIP changes every month.

  6.  
  7. #4

    Join Date
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    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    Ya learn something new every day!

  8.  
  9. Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    I know that PIP changes every month. I will provide the latest data when I get a chance.

  10.  
  11. #6

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    I just value the PIP as a SWAG on performance. You may want to check out the spreadsheet that I recently posted in my account thread for an alternative way to track your return performance. It accounts for your beginning balance, contributions and loan payment returns separately and before calculating a more realistic (IMHO) PIP and CAGR.

  12.  
  13. Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    I have attached an Excel workbook of my previous example on sheet1 and my latest account activity on sheet2. Please somebody evaluate it and show me where my errors are.
    Attached Files Attached Files

  14.  
  15. #8

    Join Date
    Jul 2016
    Location
    Texas
    Posts
    2,274

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    Looks like they are excluding Loan Payments in their calculation. Backing into calculations based on your data, it appears that the difference is 1.5 X total loan payments


    PIP Mr.Snrub Difference
    Gain $‎ 7,426.77 $‎ 7,426.77
    %age
    9.87%
    10.8%
    -0.93%
    Gain/% $‎ 75,245.90 $‎ 68,766.39 $‎ 6,479.51
    Beginning Balance $‎ (56,052.27) $‎ (56,052.27)

    $‎ 19,193.63 $‎ 12,714.12 $‎ 6,479.51


    Loans Pmts $‎ 4,394.78
    Last edited by evilanne; 03-04-2017 at 12:25 PM.

  16.  
  17. #9

    Join Date
    Feb 2012
    Location
    Arkansas
    Posts
    3,277

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    All I know is my PIP improved noticeably when I reduced my monthly distribution to the minimum ($25.00).
    No more distributions for a few years. May take a distribution when I hit 62 and my FERS supplement stops. Bridge the gap between 62, and when I decide to start drawing SS benefits. Although, I've been plugging the numbers into a couple of retirement calculators for a comparison between drawing at 62 vs. 66.5. Little, if any, difference in overall totals over the long haul.
    RetirePlan for IOS (iPad and iPhone) is an excellent planner if anyone is interested.


  18.  
  19. #10

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    its to show how much one is being scrwe'd by Long and his cohorts by preventing everybody from doing their own daily re-balancing as they see fit.
    "Our Constitution was made only for a Moral and Religious people. It is wholly inadequate to the goverment of any other." John Adams 10/11/1798

  20.  
  21. Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    Quote Originally Posted by evilanne View Post
    Looks like they are excluding Loan Payments in their calculation. Backing into calculations based on your data, it appears that the difference is 1.5 X total loan payments


    PIP Mr.Snrub Difference
    Gain $‎ 7,426.77 $‎ 7,426.77
    %age
    9.87%
    10.8%
    -0.93%
    Gain/% $‎ 75,245.90 $‎ 68,766.39 $‎ 6,479.51
    Beginning Balance $‎ (56,052.27) $‎ (56,052.27)

    $‎ 19,193.63 $‎ 12,714.12 $‎ 6,479.51


    Loans Pmts $‎ 4,394.78
    So, if we add 1.5 times the sum of loan payments to the equation, then that makes the formula as follows:

    Code:
    PIP = (EB - BB - Σ(all cash flows)) / (BB + Σ(Time-Weigted Cash Flows) + (1.5 * Σ(loan payment cash flows)))
        = (89854.59 - 56052.27 - 26375.55) / (56052.27 + 12724.39 + (1.5 * 4394.78))
        = 7426.77 / 75368.83
        = 0.098539011
        = 9.8539011%
    This is pretty close. In the next couple days, I'll run the same formula on PIP results from other quarterly statements, and hopefully those will give the same results. Thanks.

  22.  
  23. #12

    Default Re: What exactly is Personal Investment Performance (PIP) and how do I calculate it?

    I just retired the end of December, transferred a portion out of the TSP in mid February, and started monthly payments at the same time. When I went to look at my PIP it said "Your PIP could not be calculated because your monthly account balances for the entire year were unavailable." Any ideas why it would show this?

  24.  
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