Hacker News Reader

Comment by basseq | Hacker News Reader

I like XIRR to get an actual sense of what my annualized portfolio performance looks like.

Pretty much every bank, brokerage, or financial software I've used is "dumb" and will a) count deposits as growth, b) show total lifetime growth, and/or c) ignore deposits.

XIRR allows me to better benchmark portfolio performance by accounting for when I deposit (or withdraw) money so I can clearly say, "I'm earning X% per year."

Schwab is terrible at this. "You gained 5% today!" No, I didn't, I deposited $1,000 into my brokerage account.

View on HN

HealthEquity, where I keep my HSA account, manages to get this right. They use modified Dietz return which is easier to calculate than the IRR but remarkably similar.

I calculate the modified Dietz return for my other accounts too. It's easy enough that unlike IRR you don't need the function to be built in to the spreadsheet software to calculate it.

This is great! Thanks for the info.

Health equity looks like it has a bunch of unnecessary fees compared to Fidelity (which has no fees).

https://www2.healthequity.com/indexinvestor/

Fido fails the XIRR test though. Lively HSA on the other hand passes and has zero fees as well.

For folks who don't know: XIRR looks at a list of "deposit"/"withdrawals" and their dates and tries to calculate the equivalent of a fixed "interest rate" that would supply the same return for the same cash flows. So if you have a portfolio that you added and withdrew money from it calculates a % that a fixed interest savings account would need to deliver the same cash flow. Brokers are typically paid by commission/activity and thus are not incentivized to tell you the cold hard truth. XIRR is honest about how super your stonks are.

Thanks, I wanted that and just used it.

I then realized you could also manually calculate XIRR using Goal Seek. Suppose your dates are in D2:D100 and values in V2:V100. Add a cell, let's say I1, to hold an interest rate value, and another column W with formulas defined as follows (filled downward from W2):

    =$V2*(1+$I$1)^(($D$100-$D2)/365)

Then make a cell J1 with formula =SUM(W2:W100).

Run Goal Seek to find the value of I1 which sets J1 to the value 0. This will give you XIRR. (At least for non-leap years. I'm not sure how leap year logic works.)

Personal finance is simple, financial planning (forecasting/scenario planning) is hard, and building software to "teach" this to customers is vastly harder and not really in the wheelhouse of financial institutions. This isn't to defend such companies, nor to knock developers, just to point out that it's very difficult to meet people where they are on this very personal topic.

Then again, the Ux of Fidelity's site, for example, is also a great example of how not to do things, IMO.

Also annoying, most stock trackers in brokerages and elsewhere really don’t track dividend payments as performance either.

I was trying to figure what this XIRR does: XIRR is the Excel function computing the IRR, which I didn't know about: https://www.investopedia.com/terms/i/irr.asp

But this is actually equivalent to what I knew as money weighted returns: https://www.investopedia.com/terms/m/money-weighted-return.a...

FWIW, my brokerage (Raymond James) does this right.

Reply on news.ycombinator.com