Building a Portfolio Tracker That Tells You the Truth

Most people who track a portfolio track the wrong number. The figure that feels natural — current value minus what I think I put in — flatters good decisions, hides bad ones, and ignores currency entirely. Here is how to measure honestly, and how our portfolio page fits in.

Start With Cost Basis

Cost basis is what you actually paid, including commissions and any purchase taxes such as UK stamp duty or European financial transaction taxes. When you buy the same asset repeatedly at different prices, you need a convention:

• Average cost — total spent divided by total units. Simple, and the default in many European jurisdictions.
• FIFO — first in, first out. Common for US reporting.
• Specific identification — choosing which lots you sold, which allows tax-loss harvesting but requires disciplined records.

Pick one and never mix them; mixing conventions produces numbers that cannot be reconciled with any tax filing.

Realised Versus Unrealised

An unrealised gain is a position that has risen and is still held. A realised gain is locked in by a sale. The distinction is emotional and fiscal: unrealised gains can evaporate, and in most jurisdictions only realised gains are taxable.

A tracker that shows only total value teaches nothing. Separating the two shows whether your results come from decisions you completed or positions you are still exposed to.

Time-Weighted Versus Money-Weighted Return

This is the distinction that separates a real performance figure from a flattering one.

Time-weighted return removes the effect of deposits and withdrawals. It answers: how well did my selections perform? It is what fund factsheets report, and it is the only fair way to compare yourself to an index.

Money-weighted return (internal rate of return) accounts for the size and timing of your cash flows. It answers: how well did my money actually do? An investor who bought heavily just before a crash has a worse money-weighted return than time-weighted, and that difference is real information about timing behaviour.

Serious tracking shows both. They diverge most for exactly the investors who most need to see it.

The Currency Layer

For a European holding US assets, every position carries two bets. A 12% gain on a US stock with an 8% dollar decline is a 4% gain in euros. For a US investor holding European equities the mirror applies.

Track a base currency and stick to it. Converting at today's rate for current value and at the transaction-date rate for cost basis is the only way to see the true result, and it is where most homemade spreadsheets quietly break.

Fees, Dividends and Drag

Include everything: platform fees, custody charges, fund expense ratios, FX conversion margins, and withholding tax on dividends. US withholding on dividends paid to European investors is reduced by treaty if the correct form is filed, and Europeans holding US-domiciled funds face different treatment than those holding Irish-domiciled UCITS versions of the same index.

Also record dividends and distributions. A total-return figure that ignores dividends systematically understates equity performance, and over long periods reinvested dividends account for a very large share of total return.

Benchmark Honestly

Compare to something you could actually have bought. A globally diversified portfolio should be measured against a global index, not against whichever index performed best. And compare after your costs against the index's costs — beating an index gross of fees and losing to it net of fees is the most common outcome in retail investing.

What Our Portfolio Page Does

The portfolio page lets you record holdings and see live valuations and unrealised profit and loss against your entered cost basis, using the same market data as the rest of the site. It is a tracking tool: it does not connect to a broker, execute trades, or provide advice, and figures should always be reconciled against your broker statements before they are used for any tax or financial purpose.

Nothing in this article is investment, tax or legal advice. Rules differ by country and by individual circumstance; consult a qualified professional.