Do you know your real return?

Mistake 7 of 10: measuring the wrong performance. Your real return is what your money earned after fees and inflation, against a benchmark you chose in advance.

Your real return is what your money earned after fees and inflation, measured against a benchmark you chose in advance.

The mistake

Judging a portfolio by last quarter’s number, by a headline index, or by the one holding that did well. None of these tells you whether you are on track for your goals.

The evidence

Consumer prices rose 3.7% over the 12 months to September 2026 (BLS, Consumer Price Index, released 14 October 2026). At that rate of inflation, a 6% return buys only about 2.2% more than it did a year ago.

Over longer periods the effect compounds. Here is what $1,000,000 buys after 20 years, in today’s dollars:

Average inflationBuying power of $1,000,000 after 20 years
2% a year$673,000
3% a year$554,000
4% a year$456,000
Hypothetical illustration. Rounded to the nearest $1,000.

Two returns, two questions

Time-weighted return measures how the investments did, ignoring when money went in or out. It answers: did the portfolio do its job? Money-weighted return counts the timing of your deposits and withdrawals. It answers: what did my money earn? Mistake 4 shows how far apart the two can be.

Both mean more against a benchmark chosen before the results come in: an index or blend that matches the allocation your plan calls for.

What to do instead

  1. Pick your benchmark now, from your target allocation, and write it down.
  2. Look at both returns, time-weighted and money-weighted, after fees.
  3. Subtract inflation to see what your money can actually buy.
  4. Measure progress against each goal in its base case, not against last year.

The tool: an “am I on track?” page

MeasureThis yearSince you started
Portfolio return, time-weighted, after fees
Your return, money-weighted, after fees
Benchmark you chose in advance
Inflation (CPI-U)
Real return (your return minus inflation, roughly)
Fees paid, in dollars
Each goal: on track in the base case?

How this is handled in practice

Performance is reported against a benchmark, so the question “is this working?” has an answer rather than an opinion. Vivek holds the CIPM® designation, which is about measuring and evaluating investment performance. Investment management is offered through Gwynedd Wealth Partners, LLC.

This article is for education and is not a recommendation to buy or sell any security. The illustration is hypothetical. Past performance does not guarantee future results. Investment advisory services are offered through Gwynedd Wealth Partners, LLC.