In Part 1, we talked about TWRR (time-weighted rate of return) and MWRR (money-weighted rate of return), which are essentially used to answer the questions, “what is my return if I ignore cashflows,” or “what is my return, including the impact of cashflows,” respectively. The other return measures we’ll cover today exist to shed light on “return” from other perspectives, so that’s how I’ll break it down. This topic can get pretty complex, so we’re still going to keep this at a relatively high level. And we’ll throw in a little bit of gardening and Magnum P.I., just for fun.

Today also marks the final regular audio/podcast version of Alt Blend (tear). Thank you to all who have listened, but we will be producing only the written version for the foreseeable future. Here we go!

Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com

Doing something for the mere joy of it – for one’s self or others – is quite possibly one of the best returns on an investment of time that a person can receive.” – Laurie Buchanan, Ph.D. (author)

Perhaps someday, we’ll be able to explicitly measure the joy associated with how we spend our time – and maybe that will even have implications for how we approach financial planning. After all, it would be cool if we could estimate the likelihood of joy based on the path a person pursues and incorporate that with the financial side of the picture. But I digress. For now, we have a variety of return measurements to help assess investment managers, advisors, portfolios, and – of course – Alts. A basic understanding of “what’s what” across that return-measurement spectrum can have a lot of utility.

After laying a lot of groundwork for the edition of Alt Blend entitled Incoming: Part 4 –– we discussed the significant difference between taxable gain/loss and total return. Unsurprisingly, investors often assume the associated gain or loss shown on their account-holdings screen or statement is the same as the performance. It required four blog posts to differentiate between tax basis and total return properly, but I think we can be more efficient in exploring various return measures – and that’s the journey we embark on together today. Here we go.

https://altblend.com https://thebahnsengroup.com

If you haven’t already read or listened to Part 1 of this series, I suggest you do so before getting into the below, as some of the references could otherwise be confusing. In that edition, we talked Boston (the band, not the city), their hit Don’t Look Back, Cadillacs, fund blowups, and why it’s important not to let negative past investment experiences cloud our judgment when it comes to sound financial planning. There is an appropriate level of risk to be taken in each situation, and not taking enough risk can be detrimental to a long-term plan. Picking up where we left off, let’s look at the opposite side of the situation. Here we go! 

Links mentioned in this episode: https://altblend.com https://thebahnsengroup.com