KoreWhy does your portfolio grow when you're not making money? How to calculate monthly returns
If you put money into your investments every month, your portfolio's value goes up almost every time, even when the market falls. That increase measures how much your net worth grew, and part of it is your own money that just changed places. To know how your investments did in a given month you have to take out what you added; across several months, you also have to chain the results together.
Two different questions
Your portfolio's value at the end of the month answers one question: how much money do I have in there? Compare it with last month's and you get your net worth growth, which includes everything that came in and went out.
Return answers another: how much did my investments gain or lose on the money that was already invested? To measure it, deposits and withdrawals have to come out of the calculation.
With no money moving in or out, the two numbers match; with a large deposit, they can point in opposite directions.
A four-month example
Lucía starts January with 10,000 dollars invested and adds another 5,000 in February. These are example values, and percentages are rounded to two decimals.
| Month | Start | Deposit | End | Net worth growth | Monthly return |
|---|---|---|---|---|---|
| January | 10,000 | 0 | 10,300 | +3.00% | +3.00% |
| February | 10,300 | 5,000 | 15,100 | +46.60% | −1.94% |
| March | 15,100 | 0 | 15,553 | +3.00% | +3.00% |
| April | 15,553 | 0 | 15,242 | −2.00% | −2.00% |
February is the month her net worth grows the most. But the balance rose by 4,800 dollars when Lucía had put in 5,000: without the deposit, the portfolio would have ended at 10,100, 200 less than at the start of the month. The month that looks best was, for her investments, a losing month.
The calculation for a month with deposits
Monthly return = (end value − deposits + withdrawals) ÷ start value − 1
For February: (15,100 − 5,000) ÷ 10,300 − 1 = −1.94%.
This formula assumes the deposit arrived at month end and gained or lost nothing. If it arrived at the start, add it to the starting value instead: 15,100 ÷ (10,300 + 5,000) − 1 = −1.31%. The bigger the deposit relative to the portfolio, the further apart the two versions get. The exact approach is to split the month on the day of the deposit, using the portfolio's value that day.
How to combine several months
Turn each monthly return into a factor (1 + r), multiply the factors and subtract 1 at the end. With the factors rounded to four decimals:
1.0300 × 0.9806 × 1.0300 × 0.9800 − 1 = +1.95%
That is the chained return, also called the time-weighted return (TWR). Every month carries the same weight regardless of how much money was invested, which is why it works for comparing your investments with an index or a fund.
Over the four months, Lucía's net worth grew 52.42%, her chained return was +1.95% and her gain in money was 242 dollars (15,242 − 10,000 − 5,000).
Adding up the monthly percentages gives 2.06%: close here, but the gap widens in more volatile months.
In a spreadsheet
Put the months in rows 2 to 5, with these columns: A Month, B Start, C Deposit, D End, E Growth, F Return and G Factor. Enter January's start (B2) and each month's deposit and end value by hand.
| Cell | Formula | What it calculates |
|---|---|---|
| B3 | =D2 | each month starts where the previous one ended |
| E2 | =D2/B2-1 | net worth growth |
| F2 | =(D2-C2)/B2-1 | monthly return |
| G2 | =1+F2 | the month's factor |
Copy the formulas down to row 5 (column B from B3). Withdrawals go in column C as negative numbers, and the formula in F already adds them back.
For the whole period, in Google Sheets or Excel:
- Net worth growth:
=D5/B2-1, which gives 52.42%. - Chained return:
=PRODUCT(G2:G5)-1, which gives 1.95%. - Gain in money:
=D5-B2-SUM(C2:C5), which gives 242.
How to read a monthly heatmap
A grid with one color per month is quick to read, but before you celebrate a green month, check what each cell measures. If it shows net worth growth, a month with a big deposit comes out bright green even if your investments lost money, like Lucía's February. A useful tell: if your greenest months line up with the months you added money, the grid is showing you your deposits.
The same goes for the yearly total. If it chains the months, it's a return; if it compares the year's ending value with its starting value, it includes everything you put in.
What about XIRR?
The chained return measures how your investments did, without taking into account whether you added money right before a rise or right before a drop. To know how much you earned, with your own dates and amounts, there's XIRR, the money-weighted return. We cover it in how to calculate your portfolio's real return.
How you see it in Kore.
- Kore. records every transaction with its date and separates the money coming in or going out (deposits, withdrawals, and the part of a purchase that the cash you'd already recorded doesn't cover) from what your investments gain or lose.
- It uses those flows to calculate your XIRR.
- Below the Net Worth chart on the Dashboard, Period Change shows how much your net worth moved over the selected period, contributions included, and its help text spells that out so you don't read it as a return.
- On the Dashboard, the Net Worth HEATMAP view, in TOTAL mode, shows each month's return with deposits and withdrawals taken out, chained together; if you filter by class, the grid switches to net worth growth and says so.
- Everything is compared in one currency (dollars).
Try it in the demo, no account needed.
Frequently asked questions
Why does my portfolio go up when I'm not making money?
Because its value includes the money you keep adding. If you contribute every month, the balance grows even when your investments are flat or down a little. To see the result, subtract your deposits from the end value before comparing it with the start.
Can I just add up each month's return?
Only as an approximation. The correct way is to multiply the factors (1 + r) and subtract 1. In the example, adding gives 2.06% and the correct calculation gives 1.95%.
What if I add money in the middle of the month?
Pick one convention and stick with it: subtract the deposit from the end value or add it to the starting value. If the deposit is large relative to the portfolio, split the month on the day of the deposit.
Do dividends count as deposits?
No. If they stay in your investment account, they're part of your return. They only count as money moving if you transfer them to your bank account, and then they're a withdrawal.