How much money have your investments made?

Derek Shevkenek - May 23, 2017

How do you know how your investment account is doing? How much money – in actual dollars – have you made or lost?

First, to figure out your “net invested” amount (AKA “net contribution”), take the total amount of money you’ve ever deposited into an investment account, and subtract what you’ve withdrawn. Next, subtract the net invested from market value. If the number is positive you have a gain.
As a simplified example, say you open an account and deposit $100,000. You add $250 per month for 10 years, stop the deposits and withdraw $25,000. Doing the math, $100,000 plus $30,000 in additional deposits equals $130,000. Subtract the $25,000 withdrawal, and your net invested amount is $105,000. If the market value of the account is $140,000, you have a $35,000 gain.
Account statements show cost (book value) and market value. So it would seem you could subtract cost from market value to figure out gain or loss – but you can’t. Cost is often not the same as net invested. For example, automatic reinvestment of interest and dividends increases cost but not the net invested amount.
Further, if you receive an annual “Realized Gain/Loss Report”, it’s only showing taxable capital gains or losses. It’s entirely possible you could have a reported realized loss in an account that had an overall investment gain. Confusing, I know.
Typically, a “Performance Report” is the best place to find how much money your investment account has made or lost. The report will show the dollar value of net invested amount, market value and investment gain or loss since the beginning of the account. A performance report should also show your gain or loss as percentage returns over various timeframes too.
I didn’t mention inflation, since it isn’t included in investment account reporting. Nevertheless, to account for the impact of inflation, say you invest $100,000, don’t add or withdraw anything and it grows at 2% per year. 10 years later you’d have $121,800 for a $21,800 gain.
However, assuming inflation is also 2% you’d actually have no “real” (inflation-adjusted) gain at all. Your account value is higher, but $121,800 is worth the same as $100,000 was 10 years ago. Inflation gobbled up your gain.
Inquiry welcome at Opinions are those of Derek Shevkenek and may not reflect those of BMO Nesbitt Burns Inc. The information and opinions contained herein have been compiled from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. BMO Nesbitt Burns Inc. is a Member - Canadian Investor Protection Fund. Member of the Investment Industry Regulatory Organization of Canada.