I am confused between ROE and ROI.

George Friedman

I want to order securities in my portfolio by performance. It isn't clear to me whether I should sort by ROE or ROI.

q_lurker

See the definitions in the glossary.

ROE is a corporate level measure.  It is downloaded data about the company.  It has nothing to do with how well you have managed or chosen your investments,

ROI is internal to your Quicken data, the return on your investment.  But I find that also limiting given how Quicken determines the Amount Invested.  

My preferred single performance measurement is Average Annual Return, aka Internal Rate of Return, IRR.  In a portfolio view, data is presented for 1-, 3-, and 5-year periods.  More flexible calculations are available through an Investment Performance Report, though that is not sortable.

George Friedman

Thank you. I didn't realize that average annual return was IRR. It would be nice if the period could be specified rather than the few choices that are in the selection list. One year can be a very long time, particularly if some of the securities have been held less than a year, which results in a N/A.

Tom Young

George Friedman said:

Thank you. I didn't realize that average annual return was IRR. It would be nice if the period could be specified rather than the few choices that are in the selection list. One year can be a very long time, particularly if some of the securities have been held less than a year, which results in a N/A.

You can always run a Performance Report for the short period, limited to the one security.  Many people though get confused by that report, too.

q_lurker

George Friedman said:

Thank you. I didn't realize that average annual return was IRR. It would be nice if the period could be specified rather than the few choices that are in the selection list. One year can be a very long time, particularly if some of the securities have been held less than a year, which results in a N/A.

I have heard (but not seen personally) that the newest QW presents a value rather than the NA -- and some users don't like that because the value for very short time periods can be misleading - overstating performance drastically.

Tom Young

George Friedman said:

Thank you. I didn't realize that average annual return was IRR. It would be nice if the period could be specified rather than the few choices that are in the selection list. One year can be a very long time, particularly if some of the securities have been held less than a year, which results in a N/A.

I'm not sure if it's "overstating" performance or not, or people just don't understand what's going on. 

For example, you might buy a stock for $1,000 and one month later the stock's worth $1,100.  Now you might SWAG that result and say "WOW if this (10% increase) keeps up my return for the year's gonna be around 120%!! (12 x 10%). 

But the way the math works out that's going to be reported as a 207+% IRR because of the compounding.  I would guess most people would look at that 207+% and say "NO WAY! Quicken's obviously screwed up."

Jim_Harman

George Friedman said:

Thank you. I didn't realize that average annual return was IRR. It would be nice if the period could be specified rather than the few choices that are in the selection list. One year can be a very long time, particularly if some of the securities have been held less than a year, which results in a N/A.

One way to reduce confusion in the Investment performance report is to not use the default YTD date range, especially early in the year. If you set the date range to Yearly/current year, it will assume that today's prices will stay constant for the rest of the year, so the 10% gain in your example would show as 10%.

Another approach is to set the date range to Last 12 months, so it looks back one year from today.