Working out the return on your share portfolio.

One would think it isn't too difficult to work out the return on one's share portfolio. There are however some interesting complications. Lets say you have a share portfolio that has done well during the 1st part of the year but makes a loss during the second. Lets also assume that you make contributions and withdrawals (negative contributions) throughout the year. If you had R 20 000 in the portfolio at the beginning of the year and withdrew R 15 000 in the middle of the year what is your percentage return? Surely the 1st half of the year should have a heavier weighting than the second in calculating your return on investment, since more was invested during this time period. I did some searching on the Internet looking to find a solution to this problem. I found what is called the "money-weighted" return. Excel has a function called XIRR that can compute this, here is Microsoft's description of the function:

"The following information describes the algorithm used by the XIRR() function of Microsoft Excel to compute the internal rate of return on a schedule of cash flows that are not necessarily periodic, that is, payments may be made at different time intervals."

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