Nutmegs calculations of growth/loss

[JapanRed]

Does anyone on here have investments with Nutmeg? I’m confused by how they calculate their returns, as it appears flawed.

Say I drip feed £100 a month for 10 months making a total investment of £1000. Say this investment is now worth £1050, the app and website will say that I’ve received 5% growth on my investment.

Am I wrong in thinking that this is wrong? As I could have made the £50 profit in the first month when I only had £100 in there (making 50% growth in the first month), and then made 0% for the remaining 9 months.

Is it correct to say that I have indeed made 5% growth over the whole term?

Hope this makes sense. I’ve had a few beers and whiskies; apologies if I’m talking utter garbage.

[ellroy]

Sounds to me like they’ve taken a very, very simplistic view of the returns and can’t be arsed to time weight/money weight, I’ve had a drink as well!, the true annualised return.

[Rollin]

Apology accepted.

[xeny]

ellroy said:

Sounds to me like they’ve taken a very, very simplistic view of the returns and can’t be arsed to time weight/money weight, I’ve had a drink as well!, the true annualised return.

I wonder if it is a case of presenting the kind of answer what they consider their typical customer would expect to see?

[JulianPH]

JapanRed said:

Does anyone on here have investments with Nutmeg? I’m confused by how they calculate their returns, as it appears flawed.

Say I drip feed £100 a month for 10 months making a total investment of £1000. Say this investment is now worth £1050, the app and website will say that I’ve received 5% growth on my investment.

Am I wrong in thinking that this is wrong? As I could have made the £50 profit in the first month when I only had £100 in there (making 50% growth in the first month), and then made 0% for the remaining 9 months.

Is it correct to say that I have indeed made 5% growth over the whole term?

Hope this makes sense. I’ve had a few beers and whiskies; apologies if I’m talking utter garbage.

It is correct. You have indeed received 5% growth on your capital invested over the 10 month time frame. There is no other way of saying this.

This is of course a completely different figure to the performance of the fund/portfolio you were invested in over this period as, for example, only one tenth of your money was invested for the full period.

So this figure is showing your personal return, not the return of the fund/portfolio itself.

[Heres Johnny]

You’re reading 5% return as 5% annualised growth, it’s not, it’s simply saying your fund is worth 5% more than you put in. Others have said variations on the same,

If you’d put 100 if for 20 months and it was worth 2080 they’d also say it had grown 4% but as an investment would not have been as good.

[JapanRed]

Thanks all. Clear as mud

[JulianPH]

JapanRed said:

Thanks all. Clear as mud

You would have received a 5% return on the money you invested with Nutmeg over this period. It is that simple.

JapanRed said:

Am I wrong in thinking that this is wrong?

Yes, you are wrong in thinking this.

I can't see how this can be explained any clearer. In your example you put in £100 a month for ten months (£1,000) and it is now worth 5% more (£1,050).

JapanRed said:

As I could have made the £50 profit in the first month when I only had £100 in there (making 50% growth in the first month), and then made 0% for the remaining 9 months.

Yes, you could have in theory (though not in reality with such a diversified portfolio/fund).

You will have made different profits and losses every single day during this term, the 5% profit is simply your position ten months into your investment.

This will have risen and/or fallen again every day since you posted.

Investments such as this are medium to long term holdings and the daily price movement should not be a focus.

If you want to find out how the investment has performed over the last year (to compare with others) Nutmeg (live every other provider) will be able to tell you this instantly.

JapanRed said:

Is it correct to say that I have indeed made 5% growth over the whole term?

Yes, it is.

I hope that helps!

[JapanRed]

ellroy said:

Sounds to me like they’ve taken a very, very simplistic view of the returns and can’t be arsed to time weight/money weight, I’ve had a drink as well!, the true annualised return.

Julian thanks for the help. I do understand what you are saying. It was the annualised return and time/money weighting bit above I didn’t understand.