Performance Reporting
Investment club software should provide members with a clear report of the clubs performance. Performance reporting, as the name would suggest, is primarily concerned with reporting investment performance using a variety of metrics that can be generally classified as Money Weighted Return or Time Weighted Returns metrics. Secondary performance metrics commonly used are Profit and Loss, Asset Allocation, Dividend Yield, Sector Weighting, Investment Types, Performance Comparison to market indices, stocks etc.
Performance reporting should not be confused with financial reporting, such as the generation of Balance Sheet, Cash Flow and Income Statements. Financial reports reflect the state of a set of accounts at a specific point in time, and not their performance over a defined period of time.
Time Weighted Returns (TWR) are a means of measuring portfolio performance over time, independent of the amount invested or withdrawn. Most importantly, TWR results are independent of investor contributions and withdrawals and therefore yield a result that reflects the performance of the investments themselves. This also makes the TWR measure ideal for comparing the performance of various portfolios, advisors or fund managers.
Money Weighted Return (MWR) metrics another measure of investment performance for a portfolio. Unfortunately the MWR measure is not suitable for comparing the performance of portfolios as the results of the formula are dependent on investor contributions and withdrawals. Some money weighted returns metrics such as internal rate of return do enable the evaluation of corporate financing decisions, but none are suitable for investment portfolio performance evaluation.
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