# What is the difference between each return measure?

Median Return

The Median return is the middle return in a sorted list of each individual security's return. When there is an odd number of returns the middle return will be the median. In the case of an even number of returns, the middle pair of returns will be averaged to determine the median.

Simple Average Return

The simple average return is calculated using an average of each individual security's return. Like any other mathematical average, each return is summed and divided by the number of returns used in the calculation.

Simple Money-weighted Annualised Return (independently calculated by Sharesight)

Exerpts from Sharesight.com

Sharesight calculates percentage returns using a dollar-weighted (also referred to as a ‘money-weighted’) return methodology. A dollar-weighted return measures investment performance taking account of the size and timing of cash flows.

The other widely used approach in performance measurement is the Time Weighted Return. In this method the effect of cash inflows and outflows is removed from the calculation. This is commonly used when evaluating fund manager performance. The reasoning behind this approach is that fund managers don’t control when money flows into and out of their fund – investors control that – so it is not reasonable to include that effect when evaluating the manager.

Investors, in contrast can control the timing of when they put money in or out of the portfolio. For this reason it is widely agreed that a dollar-weighted return is the most appropriate means of measuring performance from a private investor’s point of view.

Returns can be annualised based on the principles of a simple annualised return or by using a compound annual growth rate (CAGR).

A simple annualised return simply divides the rate or return for the period by the number of years in the investment period. A compound annual growth rate calculates the year on year growth rate that would be required to achieve the same result.

Sharesight annualises returns weighting the length of time that each capital input has been invested for, by the amount of capital invested to determine the average years invested (AYI) for each dollar of capital. A simple annualised return simply divides the rate or return for the period by the average years invested (AYI)

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