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How Often Do You Calculate Your Portfolio’s Rate of Return?

A reader recently asked how often I calculate my portfolio’s rate of return.

The answer: Never.

The performance of my portfolio over time is a function of two things:

  1. The performance of the funds in it (currently just one fund), and
  2. The impact of the timing of my purchases.

With regard to the first component, there’s no need for me to do any calculations myself. I can just look up the information on Vanguard’s website or Morningstar’s website.

In other words, the only additional information that I would gain via calculating my portfolio’s return is information about how well I’ve done with timing my purchases.

Now, as a bit of background information, my oh-so-clever strategy for timing my mutual fund share purchases is to buy shares shortly after I get paid. That’s it. In other words, I’m making absolutely no attempt to optimize the timing of my purchases. Sometimes that works out well (e.g., contributions in early 2009); sometimes it works out less-well. But it’s pure luck. And data about how lucky or unlucky I’ve gotten with the timing has no value in terms of telling me what I should expect going forward.

If I was trying to time my share purchases at opportune moments, information about how well I’ve done could be helpful. But I’m not trying to do that.

If I was trying to pick stocks with the intention of outperforming the overall market, information about how well I’ve done could be helpful. But I’m not trying to do that.

If I was trying to jump back and forth between asset classes at just the right times, information about how well I’ve done could be helpful. But I’m not trying to do that.

If I was trying to pick the hottest fund managers every year, information about how well I’ve done could be helpful. But I’m not trying to do that.

For what I am trying to do — build wealth by aggressively dumping money into a low-cost all-in-one fund which I then proceed to ignore — information about my portfolio’s performance just isn’t that useful.

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