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PERSONAL INVESTING

"Your Rate of Return" on Client Statements

Your advisor may have provided Your Rate of Return on your Raymond James client statements. Rates of Return can be reported using a number of methodologies. The following describes the calculation methodology that we use for our non-managed accounts.

Internal Rate of Return (IRR)

The IRR, also commonly referred to as the dollar weighted return, is the measurement of a portfolio's actual performance between two dates and it includes the effects from all inflows and outflows of cash and securities. Greater weighting is given to those time periods when more money is invested in the portfolio. Cash flows are factored into the calculation so the IRR of a portfolio is significantly affected by both the size and timing of any contributions or withdrawals.

Inflows and outflows can be cash deposits and withdrawals as well as movement of funds and securities between accounts and transfers in or out. Some of the contributions and withdrawals may include 'in-kind' movements such as contributions to Tax Free Savings Accounts (TFSA), Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Fund (RRIF) payments.

The IRR provides a meaningful measurement of the absolute growth of a portfolio. It is a valuable tool for determining if a portfolio is growing enough to meet a future need or a specific investment goal.

Raymond James Ltd. provides IRR for accounts open longer than 1 year. If an account has been open less than one year, no IRR is reported. For accounts open for longer periods the annualized IRR (average return for each year) is also provided for the previous 3, 5 and 10 year periods.