Why Deposits Break Your YTD Return Calculation

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By Bikash Roy

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Bikash Roy

Online Research Specialist · SEO Strategist · Web Developer

Bikash personally verifies every calculator against official standards (WHO, NIH, government data). Online research specialist, SEO strategist, and web developer with 10+ years building accurate digital tools.

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· August 17, 2026

The simple year-to-date formula has one assumption buried in it: nothing moved in or out of the account. Break that assumption and it stops measuring performance.

The example

• January 1: portfolio worth $25,000
• July 1: you add $5,000
• Today: worth $32,000

Run the standard formula:

($32,000 − $25,000) ÷ $25,000 = 28.00%

Twenty-eight percent. Except the investments did nothing of the sort. Of the $7,000 increase, $5,000 is money you deposited. The actual gain was $2,000.

Why the formula misfires

The numerator is meant to be investment gain. Adding money inflates it without any performance happening — the formula cannot tell a good year from a large deposit.

Subtracting the deposit fixes the numerator:

($32,000 − $25,000 − $5,000) ÷ $25,000 = 8.00%

Better, and still flattering. The denominator is now wrong: it says you had $25,000 at risk all year, when for the second half you had $30,000. Judging a $2,000 gain against too small a base overstates the rate.

The weighted fix

Modified Dietz weights each cash flow by the fraction of the period it was actually invested. The July 1 deposit was in for 183 of 365 days — a weight of about 0.50:

($32,000 − $25,000 − $5,000) ÷ ($25,000 + $5,000 × 0.50)
= $2,000 ÷ $27,500
= 7.27%

7.27%, against a reported 28%. A gap of nearly 21 percentage points, entirely from method.

The weight is the whole idea: half-year money should not be credited with, or judged against, a full year of opportunity.

The direction of the error

Deposits inflate. Withdrawals deflate. Take $5,000 out mid-year and the simple formula will understate what your investments did, sometimes turning a positive year negative on paper.

Both errors scale with how large the flow is relative to the account. For someone contributing monthly to a modest portfolio, the distortion is not a rounding issue — contributions can easily exceed investment gains, at which point the simple YTD figure is mostly a measure of how much you saved.

Which number do you actually want?

Two legitimate answers, and they are answering different questions.

Time-weighted return removes the effect of cash flows. It measures what the investments did, independent of when you happened to add money. This is what fund performance figures are, and it is what you need to compare yourself to an index — an index has no deposits, so only a time-weighted figure is comparable. The benchmark comparison guide depends on this.

Money-weighted return (internal rate of return) includes cash-flow timing. It measures what you experienced. If you happened to add a large sum just before a strong run, money-weighted rewards that; time-weighted ignores it.

Modified Dietz is a practical approximation of the first, which is why it is the useful one for most personal comparisons.

Practical handling

No flows this year? The simple formula is exact — run it straight through the YTD calculator and the answer needs no adjustment.

One or two flows? Modified Dietz by hand takes a minute. Weight each flow by days-remaining ÷ 365, add the weighted flows to the starting value for your denominator, and subtract the raw flows from the numerator.

Regular monthly contributions? Hand calculation stops being practical. Most brokerages report a time-weighted figure on their performance page — use theirs, and be aware it will not match a hand-rolled YTD percentage.

Comparing to a benchmark? Time-weighted, always. Nothing else is comparable.

Reading a statement that disagrees with you

If your own YTD number and your brokerage’s differ substantially and you contributed during the year, the brokerage is very likely right and the difference is methodology, not error. Check which figure they publish before assuming something is broken — and check the YTD terms reference for what each label means.

The short version: a simple YTD percentage is only a performance figure when the account was left alone. The moment you add money, it becomes a mix of performance and saving, and it will make you look like a better investor than you were.