If a member joined a full year after the original members
why is their airr higher? They own a lower % of the
portfolio.

Is this because stock purchased since their joining are
doing better than the original stocks?

How does this happen?

Thank you.

Carmen Pratt writes:
> If a member joined a full year after the original members
> why is their airr higher? They own a lower % of the
> portfolio.
>
> Is this because stock purchased since their joining are
> doing better than the original stocks?

Yes.

> How does this happen?

AIRR is a relative measure of an individual's or stock's performance.
If a member joins when the stocks are undervalued and then the stocks
appreciate, the member will have a better return than other members
who bought when the stocks were not undervalued.

Rob

Unless all members of your club joined at the same time, and
they have all contributed the same amount of money each
month, it isn't very meaningful to compare IRR for one
member with IRR for another member. The more disparate the
length of membership and/or the monthly contributions, the
less meaningful a comparison of IRRs would be.

It's like comparing a 4% APY 5-yr CD with a 5% APY 3-yr CD
and deciding on the basis of 4% vs 5% which is the better
investment. The lower APY CD could easily be the better
(more valuable) investment after 5 years (depending on what
APY you earn for 2 years on the proceeds of the 3-yr CD
after it matures).

Unless the investment amounts and membership periods are the
same, the club member with the higher IRR isn't necessarily
the one who's investments in the club have performed best.

For the same reason, it also isn't very meaningful to
compare the IRR for two individual stocks in your club
portfolio (unless you bought the stocks at the same time).

-Jim Thomas