All businesses are allocated capital and are measured by their risk-weighted return on equity.
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Fidelity Aggressive's dollar-weighted return is -33.4% a year, meaning the average customer did 25 points worse than the portfolio.
FORBES: The fortunes of an aggressive growth fund in a bear market.
This computation, which is known as a time-weighted return, assumes something, however: a hypothetical investor who started five years ago and stayed put.
The statistic that captures these results is called the dollar-weighted return.
Contrast the dollar-weighted return, which takes into account not only the percentage performance in each month but also the amount of dollars the manager has been given to work with.
FORBES: The fortunes of an aggressive growth fund in a bear market.
The five-year performance quoted above (like the ones in the tables beginning on page 136) is a time-weighted return, measuring results for a hypothetical investor who put in a sum at the beginning and stood pat.
FORBES: The fortunes of an aggressive growth fund in a bear market.
The weighted average return on those repeat sales in 2012 was 4.87%, down from 7.2% in 2011, and the average holding period for those works was 9.3 years.
Table 3 below provides a summary of the annualized standard deviation and returns for each asset class, the weighted average risk and return and the total portfolio risk and return from January 1979 through December 2009.
This technique reduced the average market cap relative to the cap weighted index and helped boost the return.
Mr Ros hopes to improve on many recent efforts to measure a firm's return over and above its weighted cost of capital.
Using a weighted score based on one-year total return, five-year total return, and five-year Sharpe ratios (a risk-adjusted measure of performance), we chose funds that outperformed their peers in core investment specialties such as: global equities, Europe, Japan, U.S., small companies, and more.
It has made negative economic earnings (meaning its return on invested capital has been lower than its weighted average cost of capital) every year going back to 1998 when my model begins.
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The bottom two rows of the table clearly show that the return of the total portfolio (which, in this simulation, was rebalanced quarterly) exceeds the weighted average of the individual portfolio components.
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