The calculation is “dollar-weighted” to allow for the actual length of time the money was invested, rather than the more simplistic calculations used by some providers in offering a participant return.
With some providers, the rate of return calculation is determined by taking the quarterly earnings divided by the sum of the participant’s beginning balance plus one-half contributions allocated during the period.
Diversified notes that financial professionals typically use the dollar-weighted method to determine investment portfolio performance.
The statements will provide a personalized rate of return for:
- Year to date activity and
- The latest 12-month period through the statement date
The statement also shows a 50-year historical average rate of return for an investment strategy similar to the participant’s for comparison.
Purchase, New York-based Diversified Investment Advisors currently provides recordkeeping to some 600,000 participants.
– Nevin Adams email@example.com