How is portfolio return calculated?
So I get that return is just (final - initial) / initial.
But what if investments are made yearly?
Say for example, $100 is invested on Jan 1st each year in the S&P500
Assuming the S&P500 gives 10% return each year, on Dec 31st of y1, the portfolio value is $110, but tomorrow, when the y2 investment of $100 comes in, it becomes $210. Does this mean that the portfolio return is now (210-200)/200 = 5%?
My guess is that something's got to do with IRR? But I can't reconcile the idea of IRR (which I only know how to apply to negative initial cash flows and positive after some given time) to portfolio return (where its positive due to $100 investment and positive due to $10 return)
If anyone can help out here, I'd greatly appreciate it!
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