A larger balance can contain a losing year.
One euro scale for balances and changes. Changes join the before and after amounts; this is a reconciliation, not a price history.
- Opening value€50,000
- Investment change−€3,000
← Value lost during the year.
- Before the contribution€47,000
- External contribution+€10,000
→ Money added at the very end of the year.
- Closing value€57,000
Includes the deposit; investments still lost 6%.
How did the investments do?
−6% here. Compare with a reference for the intended mix.
Is the goal funded?
€57,000 is available in this example. Compare it with the current expense and remaining time.
The deposit repairs the balance without reversing the investment loss. The reverse is possible: withdrawals can reduce a balance despite positive investment returns.
Reconcile the money before choosing a return measure
Balance growth is €7,000, or 14% of the opening €50,000. Remove the end deposit: €57,000 − €10,000 = €47,000; (€47,000 − €50,000) ÷ €50,000 = −6%. This simple return depends on the deposit arriving after the investment result.
Keep dated external flows for all included accounts. An internal transfer is no contribution or withdrawal for the combined portfolio.
Time-weighted return removes external-flow timing from the investment path. Money-weighted return includes flow size and timing. Apply the earlier cash-flow methods for several flows rather than using balance growth. Match currency and income treatment when comparing reports.
A mixed portfolio needs a reference for its mix.
Blended reference
6.8%Portfolio on the same basis
6%0.8 percentage points behind
Choose the reference before the outcome. Define dates, currency, total-return treatment, costs and any rebalancing rule; broad asset names alone do not match markets and risks.
Calculate the blend; preserve the original comparison
60% × 10% + 40% × 2% = 6.8%; the gap to 6% is 0.8 percentage points. Comparing with shares alone gives four percentage points but omits the intended bonds.
Index results may omit investor costs, so the reference is not automatically achievable net. If strategy changes for a sound reason, date it and preserve the earlier comparison instead of selecting a more flattering history.
Explain a gap before replacing the holding.
Fees, uninvested cash, currency and allocation can explain differences. Align annualised versus cumulative figures and which expenses are included before subtracting costs again.
Concentration or leverage can raise returns without serving the same purpose. Assess losses and spending consequences; a favourable period cannot reveal every risk, and no fixed history proves skill or future results.
Use a stable period and cost scope
FINRA’s guidance includes fees, taxes, inflation and results across years. Check which costs the reported return already includes.
Consistent calendar years and the full period since the plan began provide a usable comparison, unlike a selected winning month.
A gain can coexist with a funding shortfall.
Compare available money, time and affordable contributions with the current cost in the spending currency. A positive nominal return establishes neither purchasing power nor sufficient funding.
Bring two separate findings to the review: any implementation gap against a matched reference, and any funding gap against the obligation. More capital from contributions is not evidence of better market performance.
Paused saving, a dearer goal and weak returns call for different responses. Correct costs, contributions or expectations as appropriate; adding risk to force an old projection back into place can worsen the shortfall.