# Personal Rate of Return of TD Direct Investing



## latebuyer (Nov 15, 2015)

*New Personal Rate of Return Feature of TD Direct Investing*

This is a new feature at TD Direct Investing but I don't really understand it. What is the difference between time-weighted rate of return and personal rate of return?


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## Argonaut (Dec 7, 2010)

Time-weighted return is the theoretical growth of $1 during a particular time frame. The difference is that it eliminates the effects of any cash contributions or withdrawals. That way the returns aren't penalized or amplified by the size of your account. The investment industry tends to use this method for their funds, and it's "ethically" more sound.

Personal or cash-weighted rate of return is your actual return that would coincide with an XIRR formula in Excel. Your returns are more heavily influenced by periods you put more cash into the account, and vice versa. This one is perhaps more "realistic" for calculating your own returns, but keep in mind for performance tracking it does not represent the theoretical growth of $1 over time.


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## latebuyer (Nov 15, 2015)

Thanks. My time weighted and personal rate of return were quite similar so I guess I could keep an eye on if they were ever really different.


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## james4beach (Nov 15, 2012)

I'm a bit surprised by something here. It looks to me like different brokerages are using different methods for their Performance reports. Somehow I thought the industry had decided on a uniform methodology.

Scotia iTrade uses MWRR which is XIRR, sensitive to cash flows (see page 7)
http://www.scotiabank.com/itrade/common/Performance_Help_EN.pdf

TD Direct Investing uses time-weighted return, ignores cash flows
https://www.td.com/ca/webbroker/help/rateofreturn.html


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## Argonaut (Dec 7, 2010)

Don't necessarily need to worry if they're too different, just a different way of tracking performance. In general, for comparison with benchmarks or other people/portfolios time-weighted returns would be better. But for tracking the actual growth of your investment accounts, cash-weighted returns gives you the answer.

If you make no contributions or withdrawals to your account in a given period, both of these numbers will be the same. They'll generally tend to be pretty close though, as you have seen.


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## mordko (Jan 23, 2016)

- If you contribute a large chunk, more than 10 percent of your portfolio, in one go, and 
- if whatever you bought jumps before the end of the month, 
then you will see the difference.


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## humble_pie (Jun 7, 2009)

that TD performance widget is well-known to be so faulty that one represently recently confided to me that the calculator should be dropped.

interlisted stocks that are journalled from one currency account to the other all have false cost base/book value figures (this is not peculiar to TDDI, all brokers have these same errors.) In addition, new accounts being transferred into TD may have false cost figures. An account i transferred recently ende up with an astonishingly high number of false cost figs - about 40% of the holdings were inaccurate. In one case no one could explain why the TD had assigned the bizarre cost base/book value which they had, in fact, assigned. It was concluded that some clerk in the back office had simply made something up.

as for option performance reporting, one can forget this entirely after trading hours. Even during trading hours, i see option position valuations that are unreal.

thinly traded securities - ie securities that don't trade very single day - will have the same kind of data errors as option positions.

the sheer abundance of all these erroneous cost & market figures means that the performance widget produces a cuckoo report for all but the simplest accounts.




.


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## james4beach (Nov 15, 2012)

I do my FX gambits in TDDI by zipping interlisted securities all over the place and I noticed the performance figures go wacky when I do this, even though they should have zero effect (they are zero P/L after netting between two accounts).

I'm frustrated by performance tracking. I would love it if TD's system could properly track my performance but as long as I do those gambits I don't think it's going to happen.

humble_pie, is your signature a reference to Melania Trump's blouse?
http://www.huffingtonpost.com/entry/melania-trump-*****-bow_us_57fb127de4b068ecb5dfc1bd


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## latebuyer (Nov 15, 2015)

Yes, i'm irritated because i moved from a basic to full rrsp and now i can't use from inception as the number is totally inflated.


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## humble_pie (Jun 7, 2009)

james4beach said:


> humble_pie, is your signature a reference to Melania Trump's blouse?
> http://www.huffingtonpost.com/entry/melania-trump-*****-bow_us_57fb127de4b068ecb5dfc1bd



yes

on a more serious matter, it's impossible to get an accurate result from the TD performance widget if one gambits currencies or holds options or both
.
long story about the false cost bases/book values after currency gambits. You are right, the cost base value should remain the same whether expressed in USD (as of the day of purchase) or CAD (as of the day of purchase.) Properly speaking the broker should be using the FX rate as of the purchase date.

but it's far too much trouble for the brokers to do this, so instead when they journal stock, they simply slap on the FX rate as of the day of the journal transfer. This will nearly always create a noticeable distortion, exactly as you've seen.

long story here. All brokers are doing this. It's too much work for them to store historic FX rates as of the date of purchase - the client is supposed to do this work.

as a result thousands of canadian investors are being given false cost bases/book values by their brokers, tch.

why should we care? that's a whole other story. There's a recent cmf thread on this topic.

http://canadianmoneyforum.com/showt...er-Cost-Base?p=1172874&viewfull=1#post1172874


.


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## DavidW (May 27, 2016)

humble_pie said:


> yes
> 
> on a more serious matter, it's impossible to get an accurate result from the TD performance widget if one gambits currencies or holds options or both
> .
> ...


What is wrong with using the market value? For margin accounts they already have a loan value as a governance mechanism.

It isn't the practice of journaling shares distorting things, 100 shares is 100 shares. You say it is too much work for them to store historic FX rates as of the date of purchase, that implies the brokers can't report an accurate cost base for any foreign equity let alone one that has been journaled - and yes I agree, TD doesn't store the FX rate on the trade confirmations, they can't properly report an average cost base for foreign account equities and the client has to keep track of the average cost themselves. I also think it should be the client to keep track of the average cost base.


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## humble_pie (Jun 7, 2009)

DavidW said:


> What is wrong with using the market value? For margin accounts they already have a loan value as a governance mechanism.
> 
> It isn't the practice of journaling shares distorting things, 100 shares is 100 shares.



i believe this part of the conversation has already taken place, no? it's in the other thread, the one linked above.

this thread is not about margin. it's about the inaccuracy of the TD performance widget. The widget requires accurate cost base/book values in order to show true performance.

unfortunately some inaccuracies are baked into the TD cost base calculations & one of them definitely is the problem that occurs when shares are journalled from one currency account to the opposite. TD loses the original cost base & instead imposes an inaccurate cost based on the FX rate of the date of the journal.

james4 is describing this distortion very accurately.

the reason all this matters is because the minister of finance is driving brokers & other financial institutions to build capital gains/loss data bases for each & every one of their clients. Whereas once brokers reported sales/dispositions only to the CRA, under the new guidelines they will be reporting buys/acquisitions also.

however, there are still too many mistakes in broker gain/loss calculations. Frequent cost base errors occur when 1) accounts are transferred from one institution to another; & 2) when interlisted canadian securities are journalled from one currency to the opposite currency.

.


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## mordko (Jan 23, 2016)

latebuyer said:


> Yes, i'm irritated because i moved from a basic to full rrsp and now i can't use from inception as the number is totally inflated.


Very easy to calculate Time and Money-weighted returns using a spreadsheet if you have the records. Overall money-weighted return is particularly easy to do; you just need to dates and amounts of all the transfers in and out of the account.


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## DavidW (May 27, 2016)

HB... I am talking about your widget, use market value. Cash or margin account. Interlisted or foreign stock.

If the finance minister, through CRA, is driving the changes I think the brokers need to measure the foreign stocks the way CRA wants them. We are Canadian. Will be a much better widget.


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## DavidW (May 27, 2016)

Is there a regulation prohibiting inclusion of A and B containers with E, F and the other containers? 

It is distorting my beginning balance. Otherwise selecting _Personal Rate of Return _ and _All Non-Registered _ looks like what I would be interested in and don't track myself. Then selecting a group to view _Margin Non-Registered _or _Cash Non-Registered _might be interesting.


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## TomB16 (Jun 8, 2014)

I read this rather informative thread last year and was glad to see I wasn't the only one who found the TDDI Performance metrics to be sourced from a random number generator. Before this thread, I didn't know if it was just my account but I was seeing some crazy numbers.

None of the performance metrics for my accounts are accurate but they are more accurate than they were a year ago.

I have a Canadian spousal RRSP account which was created in February 2016 and a single contribution was transferred in. As soon as I saw a balance in the account, I purchased one TSE listed stock and set it to synthetically DRIP. No trades, contributions, or withdrawals have occurred since then.

On the Holdings tab, it shows a nice little gain in the "Gain/Loss Unrealized" column. I believe this is accurate. On the "Performance" tab, under "Time Weighted Rate of Return" for "12 months" it shows a small loss. If I go to "Personal Rate of Return" for "12 months", it shows a nice gain. The PRR gain is close to, but not the same as, what can be arrived at with long division using the December 2016 balance and today's balance.

Meanwhile, a US dollar RRSP account with a single, NASDAQ, non-DRIPping, holding that has over doubled in value in the last 12 months shows a time weighted RoR of 0.88%.

The performance tool doesn't match my spreadsheet tracking on any of my accounts, but most of them are within a few percent.

It appears that, even one year on, they still haven't gotten it right.


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## humble_pie (Jun 7, 2009)

TomB16 said:


> I read this rather informative thread last year and was glad to see I wasn't the only one who found the TDDI Performance metrics to be sourced from a random number generator. Before this thread, I didn't know if it was just my account but I was seeing some crazy numbers ...
> 
> Meanwhile, a US dollar RRSP account with a single, NASDAQ, non-DRIPping, holding that has over doubled in value in the last 12 months shows a time weighted RoR of 0.88%.
> 
> It appears that, even one year on, they still haven't gotten it right.




would the problem be the alleged cost base of the NASDAQ security? wondering where does this problem come from?

all brokers btw have significant gain/loss/performance/calculator errors. Many errors. The situation looks troubled because many clients are giving up & saying they will accept the broker errors.

it's not that the brokers are not trying hard to be accurate. It's rather that the correct data is difficult or costly to research. The financial industry is being forced by the minister of finance - acting through the IIROC - to keep gain/loss/cost base records whether these are accurate or not. 

in many cases the brokers do not know what to do. In most of these cases, a chartered accounting firm would charge a taxpayer a pretty penny to research & compile accurate cost base values for complex securities holdings. IMHO it's unreasonable for the minister of finance to expect financial institutions to keep similar accurate records for free.

a national taxpayer capital gains/loss data base is in process of being built. Twenty, 30 years from now it will be too late, in most cases, for elderly clients or their heirs to dispute a long-ago cost base. Nearly always, the records will have all been lost. The tax authorities, however, will use the financial institution numbers to assess taxpayers capital gains & losses. 

is why it's important to keep the brokers' records accurate as the transactions occur & as statements proceed through time, IMHO.


.


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## DavidW (May 27, 2016)

TomB16 said:


> I read this rather informative thread last year and was glad to see I wasn't the only one who found the TDDI Performance metrics to be sourced from a random number generator. Before this thread, I didn't know if it was just my account but I was seeing some crazy numbers.
> 
> None of the performance metrics for my accounts are accurate but they are more accurate than they were a year ago.
> ...
> The performance tool doesn't match my spreadsheet tracking on any of my accounts, but most of them are within a few percent.


Since I started seeing these I have considered them as something not very helpful, but something that could evolve into something useful someday. They do not reflect how I measure my portfolio performance, where I measure my actual returns against my planned budget. 

They also do not reflect how I assess my portfolio with regards to quality and risk. If I was to consciously stop investing through TDDI as a customer it would likely be over issues related to this.



humble_pie said:


> it's not that the brokers are not trying hard to be accurate. It's rather that the correct data is difficult or costly to research. The financial industry is being forced by the minister of finance - acting through the IIROC - to keep gain/loss/cost base records whether these are accurate or not.
> 
> in many cases the brokers do not know what to do. In most of these cases, a chartered accounting firm would charge a taxpayer a pretty penny to research & compile accurate cost base values for complex securities holdings. IMHO it's unreasonable for the minister of finance to expect financial institutions to keep similar accurate records for free.
> 
> ...


I also think it is unreasonable for the brokers to report gain/loss/cost base records for reasons outlined in other threads last year. Have they banned the purchase of shares directly from a company? Since I started using it in late 1998 Webroker has always given the impression, through omission of explanation, that they have the ability to accurately track these numbers. Things would be more honest if it was clear these numbers presented were not official and there was an area like averagecostbase.com showing how these numbers should be tracked by the customer - in this regard there has been a little improvement the last couple years. If the customer doesn't like the work they can get an accountant.

One would think having brokers be able to handle, report and submit something like foreign dividend withholding taxes would be practical, just pool the withholdings into the various foreign accounts and then submit them. From what I have seen law complexity and, in at least one instance, the decisions of a publicly exchange listed entity have made that a risky expectation also. As the investor involved in this particular instance I can't help but wonder how much tax leakage and deflection of investment capital is happening.

Accurate transaction records are important. The trade confirmation slips and monthly statement the customer receives from the broker are usually the only documentation the customer has to back themselves up when explaining their reporting of gain/loss and T-1135 calculations. Inclusion of the exchange rate on trade confirmation slips would be helpful. As a venting customer, the real time cash balance on the activity page is an improvement though I would still like to see old style checkbook like balance verification.


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## like_to_retire (Oct 9, 2016)

DavidW said:


> I also think it is unreasonable for the brokers to report gain/loss/cost base records for reasons outlined in other threads last year. Have they banned the purchase of shares directly from a company? Since I started using it in late 1998 Webroker has always given the impression, through omission of explanation, that they have the ability to accurately track these numbers. Things would be more honest if it was clear these numbers presented were not official and there was an area like averagecostbase.com showing how these numbers should be tracked by the customer - in this regard there has been a little improvement the last couple years. If the customer doesn't like the work they can get an accountant.


We do seem to have lost sight that these are _discount _brokers. Their foray into full service broker features has been driven by competition I'm sure, but they have failed, in my opinion, more often than not. I would never rely on their cost base, and well I shouldn't, as it's my responsibility to provide CRA with an accurate cost base. TDDI has certainly not succeeded with their Performance metrics, as they are woefully inaccurate in every instance that I have wasted my time in examining them. Again, it's a discount broker, and if I want performance metrics, I should be running my own spreadsheets for this. If not, go to a full service broker.

What TDDI excels at, in my opinion, is their research. It's excellent.

ltr


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## humble_pie (Jun 7, 2009)

all the brokers are erroneous; what is going on is that the big green is being dealt more than its fair share of blame, as has happened quite often in the past. 

nor is the motive competition with any other broker, full service or otherwise. All brokers were ordered by the IIROC to render performance, gain, loss & other investment records by summer 2017 at the latest.

lastly, i have no reason to believe that full service brokers will do any better with, say, options performance; or with cross-currency journalled shares. Both discount & full service brokers are using the same account management engines. Just as they have the same trading desks & the same back office administrative protocols.

what will help is the printing of large, obvious & prominent disclaimers advising clients that the efforts to report performance, gains & losses are made on a best efforts basis, based on data that is available to the firm.

clients should be encouraged to do more of their own record-keeping.

.


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## TomB16 (Jun 8, 2014)

like_to_retire said:


> We do seem to have lost sight that these are _discount _brokers.


Fair point but I don't think it's too much to ask of even a discount broker to have the power of long division.


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## like_to_retire (Oct 9, 2016)

TomB16 said:


> Fair point but I don't think it's too much to ask of even a discount broker to have the power of long division.


hehe, yeah it doesn't seem too difficult does it? Heck, I can keep track of my performance and my cost base and I ain't that bright.

ltr


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## TomB16 (Jun 8, 2014)

That was a cheap line, and was not intended to be disrespectful of you.

In my defense, it was kind of fun. :eagerness:


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