newcreation17
New member
I'm trying to work out what's going on with the personal rate of return Vanguard gives you, as it seems to be wildly off for me. This is the number stated on the home screen, and when you view performance.
I understand what IRR (and XIRR) are, and I realise the rate of return takes into account when you made investments. Here's is an outline of my payments:
Two one-off payments of £4000 in Sept 2021 and £2000 in Nov 2021. Otherwise, regular payments of £200 between (and inclusive of) Sept 2021 - Dec 2022, then reduced to £100 regular payments between Jan 2023 - and today (Dec 2023). These are technically slightly different to account for fees, and to simplify let's just say payments on 1st of the month. I'll round everything below to nearest £5 (shouldn't change much).
In total, contributions are roughly £10430 (with £945 in investments returned), and amount ended up with is £11375. It's all (except a few negligible pennies in cash) in the FTSE Global All Cap Index Fund Accumulation.
Here's what I don't get: my personal rate of return is listed as +11.36%. I tried copying my payments and dates (assuming made on the 1st each time, surely close enough) into excel and XIRR gives 4.67%, which feels intuitively for me closer to the actual figure (bearing in mind some main bulks of money were actually paid near the start, over 2 years ago). I tried to recreate this for myself, by setting up new columns where I pretend each new investment x is in its own account and took xr[sup]n,[/sup] where n is how many months ago it was invested and r = R[sup]1/12[/sup] is the monthly interest, where I can choose R to be a candidate (yearly) rate of return. And, indeed, adding all of these up and taking R=1.0467 (4.67%) I end up with almost exactly the right figure of £11375.
TLDR: it seems my investments and returns would mimic a bank paying around 4.67%. Sure, I may have made some very small errors in exact dates, fees etc., but I just can't see how this could make up to the stated 11.36% given by Vanguard. Is it because they only use IRR in yearly blocks rather than a more exact XIRR, taking into account payment times by the month? Even if so, I still don't get figures anywhere close. It'd be nice to know what's going on and what their IRR actually means! (is it really possible there can be such a huge difference if they, say, bulk things together into yearly periods?).
Does anyone have any idea of what's going on here? What am I missing?
I understand what IRR (and XIRR) are, and I realise the rate of return takes into account when you made investments. Here's is an outline of my payments:
Two one-off payments of £4000 in Sept 2021 and £2000 in Nov 2021. Otherwise, regular payments of £200 between (and inclusive of) Sept 2021 - Dec 2022, then reduced to £100 regular payments between Jan 2023 - and today (Dec 2023). These are technically slightly different to account for fees, and to simplify let's just say payments on 1st of the month. I'll round everything below to nearest £5 (shouldn't change much).
In total, contributions are roughly £10430 (with £945 in investments returned), and amount ended up with is £11375. It's all (except a few negligible pennies in cash) in the FTSE Global All Cap Index Fund Accumulation.
Here's what I don't get: my personal rate of return is listed as +11.36%. I tried copying my payments and dates (assuming made on the 1st each time, surely close enough) into excel and XIRR gives 4.67%, which feels intuitively for me closer to the actual figure (bearing in mind some main bulks of money were actually paid near the start, over 2 years ago). I tried to recreate this for myself, by setting up new columns where I pretend each new investment x is in its own account and took xr[sup]n,[/sup] where n is how many months ago it was invested and r = R[sup]1/12[/sup] is the monthly interest, where I can choose R to be a candidate (yearly) rate of return. And, indeed, adding all of these up and taking R=1.0467 (4.67%) I end up with almost exactly the right figure of £11375.
TLDR: it seems my investments and returns would mimic a bank paying around 4.67%. Sure, I may have made some very small errors in exact dates, fees etc., but I just can't see how this could make up to the stated 11.36% given by Vanguard. Is it because they only use IRR in yearly blocks rather than a more exact XIRR, taking into account payment times by the month? Even if so, I still don't get figures anywhere close. It'd be nice to know what's going on and what their IRR actually means! (is it really possible there can be such a huge difference if they, say, bulk things together into yearly periods?).
Does anyone have any idea of what's going on here? What am I missing?