How well is your Club doing?  Are you beating the market?  Are you making money?  Would you have made more money by putting your subscriptions into an index tracker rather than into your Club?  What is the return from your investments?  Would you have made more money just by leaving it in the bank.....or even just putting it under your mattress? 
   
These are all questions that every Club member should have an interest in.  But answering them is not as simple as you might think.  The Rolling Stocks Investment Club has grappled with these questions and use a number of measurements to help us see the answers.  This page provides a number of graphs and statistics that help illustrate the performance of our Club.  It acts as a "metrics catalogue" as no single measure is sufficient.  Indeed, using any single measure can be very misleading if you rely on it as the definitive assessment of your Club's performance.   

The table below lists the metrics we use with a quick description of why each is useful and provides a link to more detail about how the metric is calculated, the current graph for it, and the possible dangers of misinterpretation if you were to use that metric in isolation as a measure of your club's performance.

Metric Why The Metric Is Useful
1 Asset Value Shows how much money the Club is worth. 
2 Profit Shows whether the Club is worth more than has been put into it.
3 Return on Investment (ROI) Shows the Club's profit as a percentage of all the funds that have been invested in the Club.
4 Unit Value (UV) Is the primary accounting tool used for tracking each member's holding in the Club but also shows how good your collective investment choices have been.  It is a "time-weighted" metric.
5 Annualised Rate Of Return (ARR) Shows the Club's return on investment but takes account of how long that money has been invested.  In effect, the ARR is the equivalent rate of interest that would have to have been paid at a bank on all your subscriptions in order to grow that money to the Club's Asset Value .  It is a "money-weighted" metric.

1: ASSET VALUE 
This graph plots the net asset value of the club (i.e. how much we're worth) in pink.  It is calculated as being the sum of the net realisable value of each investment plus any cash (i.e. what the Club would have as assets if we sold all our holdings and wound the Club up).  It is compared against how much money we have put in (in green) and what would have happened to our subscriptions if we had invested them in a FTSE Allshare tracker (in blue) rather than putting them into our club.  

Rolling Stocks Asset Value History
Danger of misinterpreting the net asset metric
If Club A is worth 20k and Club B is worth 10k then is Club A twice as good as Club B?  Not necessarily as it tells you nothing about profits.  Using asset value alone doesn't  tell you how the Club has performed.  It needs to be combined with the metric below.
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2: PROFIT
This graph plots the club's profit over time in pink.  It is calculated as simply being the difference between the net asset value (see metric 1 above) and the sum of all the subscriptions.  It is, in effect, the distance between the pink and green lines in the above graph. It is compared against what the profits would have been had we invested our subscriptions into a FTSE Allshare tracker rather than putting them into our club.  This line, in blue, is effectively the distance between the green line and the blue line in the above graph.

ROI relative to FTSE tracker
Danger of misinterpreting the profit metric
If Club C has made 10k profit and Club D has made 5k profit then is Club C twice as good as Club D?  Not necessarily, as it depends how much has been invested in each club.  For example,  if Club C had made its 10k profit on 100k subs, whereas Club D had made its 5k profit on 10k subs then whilst Club C has made most profit, Club D has done relatively better with its investment.
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3. RETURN ON INVESTMENT (ROI)
This graph plots the Club's return on investment over time (in pink).  It is calculated as the profit (see metric 2 above) divided by the sum of all the subscriptions paid into the Club, expressed as a percentage (e.g. if a club has made 5k profit on 10k subs then it has made a 50% ROI). It is compared against what the return on investment would have been had invested our subscriptions into a FTSE Allshare tracker (in blue) rather than putting them into our club

Unit Value relative to FTSE
Danger of misinterpreting the ROI metric
If, as in the example in metric 2, Club C has a ROI of 10% (10k/100k) and Club D has a ROI of 50%(5k/10k) then is Club D five times better than Club C?  Not necessarily, as it depends how long the return as been over.  There are two aspects to this.  Firstly, Club D may have put its 10k investment together 10 years ago and obtained the 5k profit over that period whereas Club C may have only started investing yesterday and they've already made a return of 10% on their 100k.  Secondly, Club C and D may even have possibly invested  the same 10k amount at the same time (with Club C making 10k profit on it and Club D 5k profit on it), but if Club C then invests another 90k to their Club this will immediately bring down their ROI, which is a little unfair!.  Thus, even using ROI alone is misleading.
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4. UNIT VALUE
The first of the three graphs below simply plots the Club's unit value over time.  For an explanation of how unit value works and how it is calculated, click here. It is compared against the FTSE Allshare (in blue) which has been rebased to allow a direct comparison.  "Rebased" simply means that its value has been adjusted to give it the same starting point as the unit value when the Club started.  For example, at the start of the Club, the FTSE Allshare was at 2727. Dividing by 27.27 converts this number to 100.  By dividing the value of the FTSE Allshare each month by 27.27, we can plot it as a direct comparison against our unit value.  The second graph just shows the % change of our unit value each month and compares that with the monthly % change of the FTSE Allshare.  The third is an attempt to show how the club has performed independently of the market as a whole. It comprises the unit value divided by the rebased value of the FTSE AllShare. The blue line is the linear regression trend (i.e. a 'best fit' straight line for the data). The trend line slopes upwards which shows that the club has been outperforming the market. The steepness of the slope represents the degree of outperformance - the steeper the better. NB: If it  were flat then the club would be performing in line with the market and if it were sloping downwards then it would be underperforming. This chart also shows the volatility of the outperformance: if the pink line stays close to the trend line then the outperformance is consistent; if it diverges significantly from it then the club is performing rather better or worse than on average.

Unit Value
UV Change
UV relative to FTSE
Danger of misinterpreting the Unit Value metric

The Unit Value is probably one of the most used metrics but is also one of the most misleading.  For an illustration as to how misleading relying on unit value can be as a measure of club performance, click here.
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5. ANNUALISED RATE OF RETURN (ARR)
The Annualised Rate Of Return (ARR) is, in practical terms, the equivalent amount that a bank or building society would have had to pay in interest to produce the same result as the club.  It is sometimes called the Internal Rate of Return (IRR). The graph below plots the ARR for the Club since it started (in pink).  This can be compared against the equivalent ARR for the FTSE Allshare since the club started (in blue).   Tthe graph shows what the 12-month performance has been in ARR terms (in orange).  That is, whereas the pink line shows the average annualised rate of return since the club began, the orange line shows the rate of return over just each 12 month period.  This can be compared against the Bank of England base rate.  The ARR is more difficult to calculate than any of our other metrics but for an explanation of it works, click here.  It is compared against the annualised rate of return of a FTSE Allshare tracker.  The graph below is actually two graphs!  This is because the performance over the first couple of years when the club's assets were small has such a significant impact on the y-axis that the graph isn't sensitive enough to clearly distinguish between the lines in more recent months.  The second graph plots the same values but the plots prior to 2008 are not shown.

ARR
ARR recent
Danger of misinterpreting the ARR metric
It's difficult to think of how the ARR metric can be misinterpreted.  Indeed, we don't think that there is a particular pitfall in using this metric as a club with an ARR of 10% will always have performed better than a club with an ARR of 5%.  For these reasons, we believe that ARR is the most appropriate measure of club performance. Just be aware that calculating the ARR over a very small period can be misleading (for example, a rise of 10% in one month is an ARR of 214%).  For these reason, it is best to only start quoting and comparing ARRs where the sample period is at least 12 months.
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The Danger Of Relying On Unit Value  . 

Imagine that two clubs start up at the same time, Club A and Club B say.  Each has an initial 1000 and each club has agreed an initial unit value of 100p. So.....each club has 1000 units.  Easy.
    Club A invests its 1000 in some shares and the shares in treble overnight!  "Fabbo" they say, understandably.
    Club B invests its 1000 in some shares and they drop to a third of their value overnight!  "Not so fabbo" they say, understandibly.
At this point, Club A's assets have grown from 1000 to 3000 and their unit value will now be at 300p (as they've still got 1000 units). 
At this point also, Club B's assets have shrunk from 1000 to 333 and their unit value will now be 33.3p (as they've still got 1000 units too).

"Unit value still looks a good way of comparing these two clubs though" you say.  Yes but.......

    Now let's say a few months pass and share prices haven't moved at all (so no change in unit value for each club) and over that time each club have put another 9000 cash in via their subscriptions.  With Club A's unit value still at  300p, this new cash will have 'purchased' another 3000 units (9000/300p) so they'll now have 4000 units.   Club A's assets will have gone up to 12000 (the initial 1000 which had trebled to 3000, and the new 9000 cash).  Club B situation will be that their unit value will still be at 33.3p so their new cash will have 'purchased' 27027 units (9000/33.3p) so they'll now have 28027 units.  Club B's assets will have gone up to 9333 (the initial 1000 which had dropped to a third in value (333) and the new 9000 cash). {Is anyone still reading this stuff?.....I'll carry on just in case!}.

    Now let's say both clubs invest this new 9000 cash pile into shares so that both clubs are fully invested.   

Next day, all Club A's shares halve in value overnight so their assets are down from 12000 to 6000.  They still have 4000 units but now each is worth 150p instead of the 300p the previous night.
That same day, all Club B's shares have doubled overnight so their assets are up from 9333 to 18666. They still have 28027 units but now each is worth 66.6p instead of the 33.3p they were the previous night.

Club A has a unit value of 150p.   Club B has a unit value of 66.6p.    Club A is more than twice as good a Club B???

Club A has invested 10000 (the original 1000 plus the new 9000 subscriptions) and is now worth 6000 (i.e. a loss of 4000)
Club B has invested 10000 (the original 1000 plus the new 9000 subscriptions) and is now worth 18666 (i.e. a profit of 8666).  

 "Using unit price as an indicator of a club's success is pretty deceptive" you say.   Indeed.

(Note that the above illustration isn't saying that your club should not use unit value at all.  Our club relies on the unit value approach to keep track of each member's holdings within the club.  This is what the unit value approach is for.  It is an excellent tool for managing how club funds are split between members.  All the illustration above is showing is that when a unit value is used to compare two club, it is misleading as that is not what the unit value tool is for).  A more appropriate metric for measuring the performance of a club is the Annualised Rate of Return (i.e. what interest rate would you have had to get at a bank in order to turn all the subs you have paid into your club, into your current asset value)).
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