Anonymous

06 Feb 2021

∙

General Investing

Do you calculate the percentage returns of your portfolio by value or cost?

Hi! I’m pretty new to investing (been doing it for about 10months) and I’m slightly addicted to looking at my portfolio. Just want to ask what do people use to calculate their portfolio holding percentages.
For example, If I put $1000 each into stock A and stock B, and Stock A grew to $1500, while Stock B is stagnant at $1000, do people calculate their portfolio as:
1. Stock A (50%) Stock B (50%) or;
2. Stock A (60%) Stock B (40%)

Is there a “proper” method? or isit just preference?

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Zac

06 Feb 2021

Noob at Idiots Invest

Are you trading or investing?

Usually after you have been investing for some time, weighting by value makes more sense.

Give you a simplified and dramatic example: your target portfolio is 50% Stock S (stable) and 50% Stock V (volatile). After 1 year, Stock V performed so well that it's 99% of your portfolio value. This is not in line with your risk profile of 50% stable, 50% volatile. So you sell of some holdings in Stock V and buy back Stock S to even out the volatility in your portfolio. Calculating portfolio weighting by cost wouldn't make sense in this scenario.

To curb your addiction to looking at you portfolio, adopt a buy and forget strategy (I assume you buy for long-term growth rather than trade to capture price movements). Set a fixed time either quarterly or semi-annually to rebalance your portfolio.

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Pang Zhe Liang

06 Feb 2021

Fee-Based Financial Advisory Manager at Financial Alliance Pte Ltd (IFA Firm)

If you are referring to the asset allocation of the portfolio after time has passed, then (2) is the correct answer.

(1) is correct only at the initial phase when you first started investing.

I share quality content on estate planning and financial planning here.

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Wrong Sean

06 Feb 2021

By value is 60/40. It is value of stock against total value of portfolio.

By cost is 50/50.

Value...

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