Show Me The Return (Petition)

[IdOp]

In other words, TWR gives you the tools to isolate these distinct elements of portfolio management. IRR, at best, jumbles them together.

I agree with that. That's part of the "TWR is suitable for managers" argument. I've never said TWR is useless or anything like that. I just feel that IRR is not categorically "wrong", but useful in its own way as well.

... c'mon! what does that 328% mean?

[ADDED: Of course, it's the discount rate that causes everything to wash at a common time. But we'd like to know more than that.] I guess it's on my tinkering to-do list, along with a couple of other things, now . Will let you know if I come up with anything, but it may take a while.

[IdOp]

... c'mon! what does that 328% mean?

Now I remember. This isn't anything deep, new or difficult, and it should be simple because otherwise the meaning wouldn't be clear.

Consider a wonderfully fair line of credit (LoC): if you had a positive balance, it pays you interest, and on a negative (debt) balance it charges you interest at the same rate. Also suppose these interests were continuously compounded. That means you can describe it like this: if you have a LoC balance C, it will grow like C(1+r)^t, where say we measure time t in years so r is the annual compound rate.

Now, the equation defining the IRR is usually written something like:

Code: Select all

               N          - t_i          -T
       C  = SUM   D  (1+r)      + V (1+r)
        0    i=1   i


(Pardon the ugly BBS typesetting.) Here we're looking at a portfolio return over a time interval [0,T]. C_0 is the initial value (or contribution), V is the final value, and D_i are withdrawals at time t_i (i=1,...,N). (If it's a contribution then D_i < 0, that's all.) This equation is solved for r, which is the IRR.

Now just rewrite this a bit. Let C_i = -D_i so the sign convention is like contributions to the portfolio. Put the sum on the left side and multiply the whole thing by (1+r)^T. You get:

Code: Select all

          N          (T-t_i)
       SUM   C  (1+r)         =  V
        i=0   i


Note that contribution C_i is in the portfolio from t_i to T, so it spends time T-t_i in it. The things in the sum are just the grown values of each contribution as they would be in the hypothetical LoC.

Basically then that's the iterpretation of the IRR: it's the rate of interest you'd need to earn and owe on a continuous compound interest LoC in order to end up with the same final balance V as your investment did, if you made all the same contributions/withdrawals to the line of credit instead of the investment portfolio. Simple, right?

Note: Someone might object that in the real world interest rates change over time. Yes they usually do. That isn't the point though. The point is to have a simple model like this, that is easily visualized (hopefully!) and tells you what r or IRR is like.

[jiHymas]

Basically then that's the iterpretation of the IRR: it's the rate of interest you'd need to earn and owe on a continuous compound interest LoC in order to end up with the same final balance V as your investment did, if you made all the same contributions/withdrawals to the line of credit instead of the investment portfolio. Simple, right?

So it's good to have a LoC that charges you 328% to borrow?

I'm not trying to be unduly belligerent here - well, no more than usual, anyway - but I cannot agree that the value of 328% calculated in the above example provides a reasonable number. Another problem is that it's extremely hard to benchmark ... if we do try to benchmark against an index, two people with different portfolio cash flows are going to come up with different - perhaps very different - rates of return for the same market.

[DanH]

I'm not trying to be unduly belligerent here - well, no more than usual, anyway - but I cannot agree that the value of 328% calculated in the above example provides a reasonable number.

Why not? The example you provided was an extreme one so an extreme return should be expected. Let's review your example.

]Joe Timer has a stock portfolio worth $100 on Dec 31. It holds just one security, the index, which has a price of 1. {XIRR entry: +100, 12/31/04}

On March 31, the price of Index is still 1, but he adds another $100. {+100, 3/31/05}

On June 30, the price of the index is 2. His holdings, therefore, are worth $400. He takes $200 out. {-200, 06/30/05}

So, Joe takes out half of his money after it doubles (in just six months)...

On Sept 30, the price of the index is 1. He adds $200 cash to the portfolio and after the investment his holdings are worth $300. {+200, 09/30/05}

...it gets cut in half again and he adds back the profit he took last quarter...

On Dec 31, the Index price is 2. He closes out his stock account with a withdrawal of $600. {-600, 12/31/05}

...it doubles a second time in the final quarter at the end of which he cashes in the whole loot...

XIRR = 328%. What does this number mean?

...and you have a problem with 328% given that successful timing (luck or not)?

Another problem is that it's extremely hard to benchmark ... if we do try to benchmark against an index, two people with different portfolio cash flows are going to come up with different - perhaps very different - rates of return for the same market.

It's not easy but it's feasible. When I provide my clients with performance updates, they get a personalized IRR but they also get an IRR for the benchmark portfolio specifies in their latest IPS.

It's not perfect, but I give my best effort to simply take the client's stream of cash flows and apply it to a benchmark portfolio (which is all made up of investable components - i.e. mostly ETFs). That's the best way to isolate my value added from selecting securities even though I could argue that I could also add (or subtract) value based purely on my asset mix recommendations but that's another matter since it's impossible to know exactly what the client would have done had they not engaged my services.

[IdOp]

So it's good to have a LoC that charges you 328% to borrow?

WADR I think that's getting a bit silly:

- you come up with an extreme example, a market that doubles in one year with superb timing added on top, and then complain the return with timing is 328%.

- the interest on borrowing vs deposits is symmetric, 328% both ways.

- I think this description of what IRR means is very easy to understand. (True, someone who is not good with algebra may not understand the proof.) All that's required to understand the meaning is some kind of LoC or deposit/overdraft product, along with continuously compounded interest which is inevitable in discussion of any returns.

if we do try to benchmark against an index, two people with different portfolio cash flows are going to come up with different - perhaps very different - rates of return for the same market.

We're going in circles. The whole point of IRR is to include market timing effects due to different cash flows. If you want to know about that, use IRR. If you want to know what the selected securities did, use TWR or look at their inherent returns. We've been through all that earlier.

[jiHymas]

XIRR = 328%. What does this number mean?

...and you have a problem with 328% given that successful timing (luck or not)?

Yup. Assuming he started with the minimum $200 total portfolio required to go through the exercise without leverage, his total portfolio has tripled - neglecting any returns he made with the money when it wasn't in the 'main' account. Which is to say, profit of 200%.

This "328%" number doesn't give me a lot of information about returns. What would I have ended up with if I'd given him a cheque for $1,000?

The implication of the 328% number is that I can put in $100 in Dec/04, let it sit and take out $428 on Dec/05, which gives the same IRR as the example. The equivalence of the two scenarios may be obvious to you, but I'm afraid it's not too clear to me!

The example was put together to give extreme numbers for ease of analysis. A new one could just as easily show a meaningless return of 20%.

Another problem is that it's extremely hard to benchmark ... if we do try to benchmark against an index, two people with different portfolio cash flows are going to come up with different - perhaps very different - rates of return for the same market.

It's not easy but it's feasible. When I provide my clients with performance updates, they get a personalized IRR but they also get an IRR for the benchmark portfolio specifies in their latest IPS.

It's not perfect, but I give my best effort to simply take the client's stream of cash flows and apply it to a benchmark portfolio (which is all made up of investable components - i.e. mostly ETFs).

You're taking a helluva risk:
(i) Client cashflows over which you have no control could turn your reported profit into a reported loss.
(ii) I suspect that it's rather difficult to explain to different clients (husband/wife, maybe) why their identical benchmarks did differently.
(iii) You can't prepare a composite without making massive assumptions; you therefore can't tell how well your clients are doing in aggregate and you can't isolate outliers programatically.

We're going in circles.

Agreed.

[DanH]

This "328%" number doesn't give me a lot of information about returns. What would I have ended up with if I'd given him a cheque for $1,000?

If you're calling this person a portfolio manager, I agree. The manager running standardized mandates should be measured on a time weighted basis.

You're taking a helluva risk:
(i) Client cashflows over which you have no control could turn your reported profit into a reported loss.

If that was the case, I'd show both and explain that one measures my skill while the other incorporates the impact of their cash flows. In a good market, this hasn't been an issue. Plus, most people opt not to get a performance report. I suspect it's because they figure they're doing well and would rather not pay me to do it (I charge an additional fee for the performance update since it involves more time).

(ii) I suspect that it's rather difficult to explain to different clients (husband/wife, maybe) why their identical benchmarks did differently.

If they have the identical benchmark, they likely have just one IPS. Accordingly, while I will break out performance by account or by individual; I only show one benchmark calculation (simply because it involves more time than it's worth).

I know, lots of problems, but the focus is on the family portfolio - with per account information shown so they can see how each account contributed to their total performance. I don't benchmark each account - only the total portfolio.

I never said I was CFAI-compliant which leads us to...

(iii) You can't prepare a composite without making massive assumptions; you therefore can't tell how well your clients are doing in aggregate and you can't isolate outliers programatically.

I don't prepare composites because it's too difficult to lump everybody together. While there are enough similar asset mixes; the constraints placed on many of the portfolios imposes too many challenges to bother with composites. Plus, I don't administer or control the money so I can only update when the client gives me updated statements and only for periods chosen by the client.

So, putting composites together is not feasible in my situation.

[Feeonly.ca]

Ellen Roseman of the Toronto Star weighs in:

Investors need to know how well they're doing

Ellen Roseman, Toronto Star, July 19,2006

Bye-bye, CIBC Investor's Edge.

You were my online broker and you were convenient. But you gave me few tools to use to measure my performance. So, I'm moving on.

I've found another online broker that will tell me the cost price of each security, the gain or loss since purchase and the annual rate of return on my portfolio.
Is that too much to ask?

I need to know how well I'm doing. And I wanted you to help me.

Rob McLeod, a CIBC spokesman, says online clients can use a portfolio tracker at the site.

"We have five portfolios available, each capable of holding a maximum of 10 securities," he added.

But that's a pretty small number. Once you get past 10 securities, you can no longer see the return on your whole portfolio.

And it's your responsibility, not the broker's, to do the work of entering all the securities and initial prices.

McLeod said a more robust portfolio-tracking tool is in the works.

You'll be able to see the performance of individual securities and the entire portfolio, not only since inception but over selected time periods, and to compare your portfolio with a model portfolio or specific index.

Sounds good. But I have no idea when this good stuff is coming. So, I'm saying sayonara.

Chartered accountant Warren MacKenzie spent more than 20 years in the brokerage industry.

"I'd go through calculations to show clients how they were doing," he says. "Then, I'd ask the firms I worked with why they didn't do it.

"They always said it was a top priority and they would get to it right away. But it never happened. Then, I started to think they really didn't want to do it."

MacKenzie now runs Second Opinion Investment Services Inc., where he looks at your portfolio and tells you what's right or wrong.

As a fee-based adviser, he sells no products or services except his ability to analyze your asset mix and risk level in an objective way.

"I'm trying to establish myself as an advocate for the average guy," he says.

So, he has started a campaign, urging the Ontario Securities Commission to bring in compulsory performance reporting.

He wants investment dealers to provide the percentage change in value, over specific time periods, of all the funds an investor contributes to an account, and an appropriate benchmark against which the performance can be measured.

At the website ShowMetheReturn.ca, there's a petition you can sign and a rate of return calculator you can try.

Full text of Ellen Roseman article: http://www.thestar.com/NASApp/cs/Conten ... 0599109774

Sign the Petition here: http://www.showmethereturn.com/petition.aspx

[jiHymas]

So it's good to have a LoC that charges you 328% to borrow?

WADR I think that's getting a bit silly:

- you come up with an extreme example, a market that doubles in one year with superb timing added on top, and then complain the return with timing is 328%.

- the interest on borrowing vs deposits is symmetric, 328% both ways.

- I think this description of what IRR means is very easy to understand. (True, someone who is not good with algebra may not understand the proof.) All that's required to understand the meaning is some kind of LoC or deposit/overdraft product, along with continuously compounded interest which is inevitable in discussion of any returns.

WADR I think that's the crux of the matter, after pondering the question for a few days.

The IRR calculation assumes symettry between borrowing and investing, which is not the case.

When you withdraw cash from your account, you are not forgoing the returns that you achieved while the cash was there. You are not paying 428% annual interest for the loan, as in this example. Your rate of return on the money withdrawn is zero.

This is how people think (and should think), and it explains why the answers given by IRR look so wrong.

IRR is good enough to handle accounts in which the cash flows are small (and when they reach the limiting case of zero, gives the correct answer), but is fundamentally flawed.

[ghariton]

IRR is good enough to handle accounts in which the cash flows are small (and when they reach the limiting case of zero, gives the correct answer), but is fundamentally flawed.

I agree.

Many years ago, I helped Bell Canada implement systems to evaluate investment options for new plant, new technologies, new services, etc. A large part of my job was to convince people not to use IRR as a measure of a project's merit (or lack of it). Rather, one should look at cash flows and their net present value.

Using IRR can give many strange results. One of the main difficulties, as mentioned upthread, is that it assumes there is a single rate at which one can lend or borrow, or indeed reinvest proceeds of an investment. That is just not realistic. Another problem is that using IRR can lead you to prefer a very small but very profitable investment to another, much larger project with a lower IRR but a higher absolute return -- that's a problem when the two projects are mutually exclusive. And of course, if there are many inflows and outflows, finding the IRR can require you to solve a high-order polynomial, with many different solutions: Which one should you be using for your analysis?

Georges

[Shakespeare]

Which one should you be using for your analysis?

The one Excel converges to.

[IdOp]

The IRR calculation assumes symettry between borrowing and investing, which is not the case.

When you withdraw cash from your account, you are not forgoing the returns that you achieved while the cash was there. You are not paying 428% annual interest for the loan, as in this example. Your rate of return on the money withdrawn is zero.

Perhaps you're expecting too close of a parallel between the investment account what I called the symmetric LoC. The latter is a simple conceptual device which selects (hopefully!, more below) a rate that when applied to the same cash flows produces the same final result at the end of the same time period. The two "accounts" get there in entirely different ways, that's true.

This is how people think (and should think), and it explains why the answers given by IRR look so wrong.

I'd say one "can think" about it the IRR way, amoung others. It is what it is.

I still find your belief that "the answers given by IRR look so wrong" very puzzling. Let's revisit briefly the Joe Trader example and look at it several ways, some of them naive:

(a) The inherent/intrinsic return, and TWR, on the market was 100%. This is just fine, but it doesn't tell us whether Joe's timing in this index was helpful or not. If we want a feel for this, we need to look at something else, so let's do that:

(b) The average amount of his own capital Joe had invested was $125. He ended up with $600. Naively the return was (600-125)/125 = 380%.

(c) Let's internalize the cash flows into the portfolio, with an interest rate of 0% (just to keep it simple). He started out with a $100 investment and cash of $0, and ended up with a $600 investment and debt of $100, net $500. Naive return: (500-100)/100 = 400%.

Compared to both of these naive gauges, the IRR of 328% (not 428% which is 1+r) looks rather modest, if anything , but certainly in the right kind of ballpark.

So I will ask, how would you prefer to get a handle on Joe's return taking account of his market timing, but not using IRR? We know IRR is "wrong", but what is your idea of the "right" answer to this question? (TWR doesn't apply here since it removes the market timing.)

Another problem is that using IRR can lead you to prefer a very small but very profitable investment to another, much larger project with a lower IRR but a higher absolute return -- that's a problem when the two projects are mutually exclusive.

I do agree with that. IRR isn't a panacea that should be used for everything. It really focusses on a given portfolio which could be quite narrow (e.g., a single bond). In a wider picture the cash flows may be important, especially if they stay within your control, and so what is done with them and the returns achieved there can matter.

IRR applied to a given portfolio is sensitive to the cash flows. That's what it can tell you. It doesn't tell you about everything outside the portfolio. That can be a benefit (a clear simple focus) or detriment (ignores wider effects of a project). That's the crux of it to me.

And of course, if there are many inflows and outflows, finding the IRR can require you to solve a high-order polynomial, with many different solutions: Which one should you be using for your analysis?

This is a great point. It is possible for IRR to have multiple solutions when there are both + and - cash flows (a necessary but not sufficient condition). At the very least this is something that would be hard to explain to "Granny Oakum" when she asks why there's no return (or several!) given on her quarterly statement . Theoretically, it's also rather unsatisfactory.

OTOH, as probably reflected in the wide use of IRR, it does seem that the actual occurrence of this problem in practice is quite rare. Pragmatically, I look at it as the price to be paid for what IRR can tell you. Does anyone know of an alternative, which does reflect market timings, and is similarly tractable but without drawbacks?

[jiHymas]

(a) The inherent/intrinsic return, and TWR, on the market was 100%. This is just fine, but it doesn't tell us whether Joe's timing in this index was helpful or not.

No, and it's not supposed to. It's simply the return on a dollar held in the portfolio for the total period.

(b) The average amount of his own capital Joe had invested was $125. He ended up with $600. Naively the return was (600-125)/125 = 380%.

Mathematically unsound to use averages.

(c) Let's internalize the cash flows into the portfolio, with an interest rate of 0% (just to keep it simple). He started out with a $100 investment and cash of $0, and ended up with a $600 investment and debt of $100, net $500. Naive return: (500-100)/100 = 400%.

Now we're getting somewhere! Return on capital in this case is 400%, and this does, in fact, tell us what we should have received if we'd cut Joe a cheque for $1,000 and told him to put it in the strategy.

In this case, we can say that Joe had a return in sub-portfolio #1 of 100% and a return of 0% in sub-portfolio #2 of 0%; and a return on the total portfolio of 400%.

Suppose that, in addition to the other suppositions thus far, sub-portfolio #1 was Energy stocks; Joe's benchmark was half energy, half cash; and the return on the Energy stock index was 150%. We can then draw the following useful conclusions:
(i) benchmark return was 0.5*1.5 + 0.5*0 = 75%. Joe has added significant value to his benchmark.
(ii) sub-portfolio #1 underperformed its benchmark substantially. Joe is a lousy stock-picker (or, at least, he was this year)
(iii) Portfolio allocations at the beginning of the year carried forward outperformed the portfolio benchmark (1.0 * 100% + 0.0 * 0% = 100%, vs 0.5*1.5 + 0.5 * 0 = 75%). Beginning of period asset allocation added value to the portolio.
(iv) Total portfolio return exceeded the no-market-timing construct substantially (400% as opposed to 100%). Market timing has added significant value.

Performance attribution is a beautiful thing! Based on these returns, I would not cut Joe a cheque this year. Stock-picking increments are much more reproducible than either asset-allocation or market-timing increments.

So I will ask, how would you prefer to get a handle on Joe's return taking account of his market timing, but not using IRR? We know IRR is "wrong", but what is your idea of the "right" answer to this question? (TWR doesn't apply here since it removes the market timing.)

If we want to know the return on capital then we have to know the amount of the capital, just as was done in your example (c).

The IRR approximation does not account for this rather vital piece of information.

[IdOp]

Now we're getting somewhere!

Glad to hear it!

Return on capital in this case is 400%, and this does, in fact, tell us what we should have received if we'd cut Joe a cheque for $1,000 and told him to put it in the strategy.

That isn't entirely clear to me. It is true if you assume he can borrow the required money on Mar 31. If you don't, then presumably half the $1000 must sit in cash at the outset, to be used on Mar 31, and his return on capital goes down to 200%. The result depends on how much cash you assign at the outset.

If we want to know the return on capital then we have to know the amount of the capital, just as was done in your example (c).

I do see what you're saying about the return on capital calculation, and how one can get some useful information by looking at it that way. By no means wanting to dismiss it entirely, I do sense though that it also has some drawbacks of its own. To explain, let's look at two brief examples.

First consider a mutual fund portfolio, with several different funds from the same company. I can switch between any of them, and there isn't any real cash. There are no external cash flows to the portfolio, just internal switchings.

Now the intrinsic returns on these funds are well published, or can be computed various ways. But I want to know how my market timing (switching) has affected my returns even at the level of each fund. ISTM that applying IRR here makes that comparison fairly cleanly and effectively.

If instead you apply "return of capital" to each fund, this basically expands the subportfolio of a single fund holding by including the notion of "cash" to make a larger isolated subportfolio. Along with this you have to make assumptions (or arbitrary conventions) about how much cash you started with (see above), and how much interest it earns on + or - balances (should it be 0, or something realistic?). The resulting return will depend on these assumptions.

The IRR approximation does not account for this rather vital piece of information.

To me, mixing all this in with the security itself seems somehow extranious, conceptually impure and non-minimal in such examples. Maybe that's a matter of taste/aesthetics, but I find it just as troublesome as you find the symmetric LoC.

The second example shows a different, less subjective, drawback. Consider an investment with given initial (t=0) and final (t=1) values, one cash contribution at time t in between, and a positive return. If you apply return on capital as in (c), then that return doesn't depend at all on when the contribution was made. [EDIT: removed finicky remark about discontinuity]

Yet the return should be larger if the contribution is made later rather than earlier, because then the same profit has been made, (mostly) on the smaller initial investment. The IRR in this case exhibits dependence on the contribution time of exactly this kind: it interpolates smoothly between the correct limiting values at t=0 and t=1, and the partial derivative of IRR with respect to t is positive. (It's also better for the investor to have had the cash free for a longer time in order to employ it elsewhere.)

[jiHymas]

Return on capital in this case is 400%, and this does, in fact, tell us what we should have received if we'd cut Joe a cheque for $1,000 and told him to put it in the strategy.

That isn't entirely clear to me. It is true if you assume he can borrow the required money on Mar 31. If you don't, then presumably half the $1000 must sit in cash at the outset, to be used on Mar 31, and his return on capital goes down to 200%. The result depends on how much cash you assign at the outset.

The strategy (as we've agreed to treat it) involves borrowing. Presumably this is in the mandate and the mandate was fully disclosed.

First consider a mutual fund portfolio, with several different funds from the same company. I can switch between any of them, and there isn't any real cash. There are no external cash flows to the portfolio, just internal switchings.

Now the intrinsic returns on these funds are well published, or can be computed various ways. But I want to know how my market timing (switching) has affected my returns even at the level of each fund. ISTM that applying IRR here makes that comparison fairly cleanly and effectively.

Firstly, I'm not sure if the concept makes any sense. Since you have no net cash flows, none of your investment decisions is fully independent: a buy of one fund is contingent on the sale of another. But we can assume that one side of each trade is always the Money Market Fund, which might make such comparisons meaningful.

Secondly, you continue to cling to this notion that IRR will give you useful information. You haven't really been able to justify this idea beyond saying that the IRR represents the answer to the IRR math.

Thirdly, your answer will not be self consistent. The IRR will assume on the one hand that you're borrowing cash at X%, while lending it at Y%, depending on the performance of the two market-based investments. There will be no way for you to reconcile your individual answers with your total.

Fourthly, there is no reason why this cannot be done in the context of TWR. Yes, assumptions must be made - but they must be made explicitly, rather than implicitly and arbitrarily as in IRR. I'd rather have the former!

Fifthly, I have no idea why you would want to go through this exercise in the first place.

The IRR approximation does not account for this rather vital piece of information.

To me, mixing all this in with the security itself seems somehow extranious, conceptually impure and non-minimal in such examples. Maybe that's a matter of taste/aesthetics, but I find it just as troublesome as you find the symmetric LoC.

'Mixing in' the capital makes it a real-world exercise.

The second example shows a different, less subjective, drawback. Consider an investment with given initial (t=0) and final (t=1) values, one cash contribution at time t in between, and a positive return. If you apply return on capital as in (c), then that return doesn't depend at all on when the contribution was made. [EDIT: removed finicky remark about discontinuity]

Yet the return should be larger if the contribution is made later rather than earlier, because then the same profit has been made, (mostly) on the smaller initial investment. The IRR in this case exhibits dependence on the contribution time of exactly this kind: it interpolates smoothly between the correct limiting values at t=0 and t=1, and the partial derivative of IRR with respect to t is positive. (It's also better for the investor to have had the cash free for a longer time in order to employ it elsewhere.)

I don't understand what you're getting at here.

[jiHymas]

Which one should you be using for your analysis?

The one Excel converges to.

Are you sure you're a retired chemist and not one of Bay Street's Finest Quantitative Managers, using complex mathematical formulae to add value while controlling risk?

[Shakespeare]

using complex mathematical formulae to add value while controlling risk

For most people, despite your extreme example, IRR is an adequate, if imperfect, measure of portfolio return - particularly when the portfolio gets large enough so that cash inflows and outflows are a modest percentage.

If you've got a better alternative, perhaps you could suggest it.

[jiHymas]

For most people, despite your extreme example, IRR is an adequate, if imperfect, measure of portfolio return - particularly when the portfolio gets large enough so that cash inflows and outflows are a modest percentage.

Sure - I've acknowledged that upthread. But IRR becomes increasingly bogus with increasing cash-flows - which my extreme example was supposed to highlight.

By pretending that performance measurement is simple and can validly be performed with IRR on randomly selected chunks of a client's total portfolio, the petitioners are attempting to do small investors a disservice.

[IdOp]

There will be no way for you to reconcile your individual answers with your total.

That would make a darn good reason for never having contemplated such an undertaking.

[DanH]

Performance anxiety

[Bylo Selhi]

One quibble, Dan. The "I’m all for it because it is a fundamental piece of information to which all investors are entitled" should have come first, front and center, followed by your contention "that GIPS are not compatible with the goal of detailing individual performance" rather than the other way around. It wasn't until I got to the bottom of the piece that I realized you really weren't dead against the notion of performance reporting

Added: One more thing that I don't think has been addressed upthread. It's common for people to have multiple accounts, at least one RRSP plus a taxable account, never mind spouse's accounts, joint accounts, account at multiple financial institutions. Presumably a set of numbers will be shown each account statement. Lets keep it simple. Say you have an RRSP and a taxable account. Is there value to most people, i.e. not DIYers and other "sophisticated" investors, to see that their RRSP (filled with fixed income) has done 5% over the past year while their taxable account (filled with equities) has done 10% (or -10%) over that period? Don't they really need to see the combined performance of all of their accounts? (Same applies to those silly pie charts that show each account's asset allocation. They're next to useless in isolation.)

[DanH]

One quibble, Dan. The "I’m all for it because it is a fundamental piece of information to which all investors are entitled" should have come first, front and center, followed by your contention "that GIPS are not compatible with the goal of detailing individual performance" rather than the other way around. It wasn't until I got to the bottom of the piece that I realized you really weren't dead against the notion of performance reporting

Would you like a [s]non-paying[/s] job as an editor?

[Bylo Selhi]

What about fringe benefits?

[Shakespeare]

What about fringe benefits?

Ask Mrs. Editor.

[jiHymas]

One more thing that I don't think has been addressed upthread. It's common for people to have multiple accounts, at least one RRSP plus a taxable account, never mind spouse's accounts, joint accounts, account at multiple financial institutions. Presumably a set of numbers will be shown each account statement. Lets keep it simple. Say you have an RRSP and a taxable account.

Not to worry. Just a few more regulations and all investors will be assigned to a financial institution which will handle all their investment affairs; which will be simple to arrange because the government will assign a fair rate of return to be applied to investment holdings. Given the abysmal failure of the so-called "free" market, as exemplified by the financial industry's arrogant refusal to provide performance reporting despite the tremulous plea of widows and orphans, no other system is viable.