Understanding Contributions vs. Investment Gains
Money you deposit is a contribution, not an investment return. Buying a stock using money already inside an account changes allocation, but does not add external money. Performance measures need cash-flow timing to be meaningful.
Hypothetical example
Hypothetical: an account begins at $1,000. You add $500 and it ends at $1,600. The balance grew $600, but only $100 remains after subtracting the deposit. A percentage return cannot be established without the deposit timing and valuation details.
Key takeaways
- Track deposits and withdrawals separately from trades.
- Modified Dietz adjusts the denominator for cash-flow timing.
- Missing transactions or current prices prevent a complete valuation; manual estimates are not verified market returns.
Source & context
www.finra.org — financial education referenceExamples are Sprinvo illustrations, not historical performance or guaranteed outcomes. Education only.