What exactly is Personal Investment Performance (PIP) and how do I calculate it?

[MrSnrub]

According to the TSP website, the Personal Investment Performance (PIP) is: "a time-weighted return that has been calculated using the Modified Dietz method (a method used by many financial institutions and an industry standard)."


The formula for the Modified Dietz Method is as follows:


Rate of Return = (EMV - BMV - C)/(BMV + WC)


EMV: Ending Market Value (Ending Balance)
BMV: Beginning Market Value (Beginning Balance)
C: Sum of all cash flows during period
WC: Sum of all time-weighted cashflows


The following table shows my TSP activity for the 2016 calendar year:

Date              Description               Cash Flows        Time-Weighted Cash Flows
12/31/2015        Beginning Balance         $56,052.27


1/14/2016         Agency Automatic (1%)         $28.58         27.48677596
1/14/2016         Agency Match (4%)            $114.31         109.9374863
1/14/2016         Employee Contribution        $693.00         666.4918033
1/15/2016         Loan Payment                 $169.03         162.102541
1/28/2016         Agency Automatic (1%)         $30.05         27.7510929
1/28/2016         Agency Match (4%)            $120.19         110.9951366
1/28/2016         Employee Contribution        $693.00         639.9836066
1/29/2016         Loan Payment                 $169.03         155.6369126
2/11/2016         Agency Automatic (1%)         $30.05         26.60163934
2/11/2016         Agency Match (4%)            $120.19         106.3977049
2/11/2016         Employee Contribution        $693.00         613.4754098
2/12/2016         Loan Payment                 $169.03         149.1712842
2/25/2016         Agency Automatic (1%)         $30.76         26.05355191
2/25/2016         Agency Match (4%)            $123.04         104.2142077
2/25/2016         Employee Contribution        $693.00         586.9672131
2/26/2016         Loan Payment                 $169.03         142.7056557
3/10/2016         Agency Automatic (1%)         $30.76         24.87693989
3/10/2016         Agency Match (4%)            $123.04         99.50775956
3/10/2016         Employee Contribution        $693.00         560.4590164
3/11/2016         Loan Payment                 $169.03         136.2400273
3/24/2016         Agency Automatic (1%)         $30.76         23.70032787
3/24/2016         Agency Match (4%)            $123.04         94.80131148
3/24/2016         Employee Contribution        $693.00         533.9508197
3/28/2016         Loan Payment                 $169.03         128.3889071
4/7/2016          Agency Automatic (1%)         $30.76         22.52371585
4/7/2016          Agency Match (4%)            $123.04         90.09486339
4/7/2016          Employee Contribution        $693.00         507.442623
4/8/2016          Loan Payment                 $169.03         123.3087705
4/21/2016         Agency Automatic (1%)         $30.76         21.34710383
4/21/2016         Agency Match (4%)            $123.04         85.3884153
4/21/2016         Employee Contribution        $693.00         480.9344262
4/22/2016         Loan Payment                 $169.03         116.8431421
5/5/2016          Agency Automatic (1%)         $30.76         20.1704918
5/5/2016          Agency Match (4%)            $123.04         80.68196721
5/5/2016          Employee Contribution        $693.00         454.4262295
5/6/2016          Loan Payment                 $169.03         110.3775137
5/19/2016         Agency Automatic (1%)         $30.76         18.99387978
5/19/2016         Agency Match (4%)            $123.04         75.97551913
5/19/2016         Employee Contribution        $693.00         427.9180328
5/20/2016         Loan Payment                 $169.03         103.9118852
6/2/2016          Agency Automatic (1%)         $30.76         17.81726776
6/2/2016          Agency Match (4%)            $123.04         71.26907104
6/2/2016          Employee Contribution        $693.00         401.4098361
6/3/2016          Loan Payment                 $169.03         97.44625683
6/16/2016         Agency Automatic (1%)         $30.76         16.64065574
6/16/2016         Agency Match (4%)            $123.04         66.56262295
6/16/2016         Employee Contribution        $693.00         374.9016393
6/17/2016         Loan Payment                 $169.03         90.98062842
6/30/2016         Agency Automatic (1%)         $30.76         15.46404372
6/30/2016         Agency Match (4%)            $123.04         61.85617486
6/30/2016         Employee Contribution        $693.00         348.3934426
7/1/2016          Loan Payment                 $169.03         84.515
7/14/2016         Agency Automatic (1%)         $30.76         14.28743169
7/14/2016         Agency Match (4%)            $123.04         57.14972678
7/14/2016         Employee Contribution        $693.00         321.8852459
7/15/2016         Loan Payment                 $169.03         78.04937158
7/28/2016         Agency Automatic (1%)         $30.76         13.11081967
7/28/2016         Agency Match (4%)            $123.04         52.44327869
7/28/2016         Employee Contribution        $693.00         295.3770492
7/29/2016         Loan Payment                 $169.03         71.58374317
8/11/2016         Agency Automatic (1%)         $30.76         11.93420765
8/11/2016         Agency Match (4%)            $123.04         47.7368306
8/11/2016         Employee Contribution        $693.00         268.8688525
8/12/2016         Loan Payment                 $169.03         65.11811475
8/25/2016         Agency Automatic (1%)         $30.76         10.75759563
8/25/2016         Agency Match (4%)            $123.04         43.03038251
8/25/2016         Employee Contribution        $693.00         242.3606557
8/26/2016         Loan Payment                 $169.03         58.65248634
9/8/2016          Agency Automatic (1%)         $30.76         9.580983607
9/8/2016          Agency Match (4%)            $123.04         38.32393443
9/8/2016          Employee Contribution        $693.00         215.852459
9/9/2016          Loan Payment                 $169.03         52.18685792
9/22/2016         Agency Automatic (1%)         $30.76         8.404371585
9/22/2016         Agency Match (4%)            $123.04         33.61748634
9/22/2016         Employee Contribution        $693.00         189.3442623
9/23/2016         Loan Payment                 $169.03         45.72122951
10/6/2016         Agency Automatic (1%)         $30.76         7.227759563
10/6/2016         Agency Match (4%)            $123.04         28.91103825
10/6/2016         Employee Contribution        $693.00         162.8360656
10/7/2016         Loan Payment                 $169.03         39.25560109
10/20/2016        Agency Automatic (1%)         $30.76         6.051147541
10/20/2016        Agency Match (4%)            $123.04         24.20459016
10/20/2016        Employee Contribution        $693.00         136.3278689
10/21/2016        Loan Payment                 $169.03         32.78997268
11/3/2016         Employee Contribution        $693.00         109.8196721
11/3/2016         Agency Automatic (1%)         $30.76         4.874535519
11/3/2016         Agency Match (4%)            $123.04         19.49814208
11/4/2016         Loan Payment                 $169.03         26.32434426
11/17/2016        Employee Contribution        $693.00         83.31147541
11/17/2016        Agency Automatic (1%)         $30.76         3.697923497
11/17/2016        Agency Match (4%)            $123.04         14.79169399
11/18/2016        Loan Payment                 $169.03         19.85871585
12/1/2016         Employee Contribution        $693.00         56.80327869
12/1/2016         Agency Automatic (1%)         $30.76         2.521311475
12/1/2016         Agency Match (4%)            $123.04         10.0852459
12/2/2016         Loan Payment                 $169.03         13.39308743
12/15/2016        Employee Contribution        $693.00         30.29508197
12/15/2016        Agency Automatic (1%)         $30.76         1.344699454
12/15/2016        Agency Match (4%)            $123.04         5.378797814
12/16/2016        Loan Payment                 $169.03         6.927459016
12/29/2016        Employee Contribution        $675.00         3.68852459
12/29/2016        Agency Automatic (1%)         $30.76         0.168087432
12/29/2016        Agency Match (4%)            $123.04         0.672349727
12/30/2016        Loan Payment                 $169.03         0.461830601


Totals:                                     $26,375.55         12742.39003


12/31/2016        Ending Balance            $89,854.59

Therefore, the Personal Investment Performance should be:

PIP = (EMV - BMV - C)/(BMV + WC)
    = ($89,854.59 - $56,052.27 - $26,375.55) / ($56,052.27 + $12,742.39)
    = 7426.77 / 68794.66
    = 0.10795562

So, if I'm calculating 10.795562%, why does it say on the TSP website and on my
quarterly statement that my Personal Investment Performance for the last twelve
months ending 12/31/2016 is 9.87%? This is very frustrating, as I have found no
way to determine exactly how the Thrift Savings Plan website comes up with that
number. Help!

 

[Cactus]

Wow, that is sure over my head. How did you arrive at the Time-Weighted cash flow? Is that info. on our quarterly statement?

The only thing I can suggest is to make sure your data covers the same time period as our TSP site. TSP calculates our 12 month PIP monthly, not annually, so if you check the figures today it will include values from Jan & Feb 2017 not 2016.

That's why I check mine in early Jan to get the annual return and it matches pretty close to what I've computed in the TSPTalk spreadsheet.

 

[Intrepid_Timer]

As Cactus said, your PIP is a month to month rolling 12-month period. If you talking about your PIP this month, it runs from the end of Feb in 2016 to the end of Feb in 2017, not Jan thru Dec of 2016. You're PIP changes every month.

 

[James48843]

Ya learn something new every day!

 

[MrSnrub]

I know that PIP changes every month. I will provide the latest data when I get a chance.

 

[blueroadster]

I just value the PIP as a SWAG on performance. You may want to check out the spreadsheet that I recently posted in my account thread for an alternative way to track your return performance. It accounts for your beginning balance, contributions and loan payment returns separately and before calculating a more realistic (IMHO) PIP and CAGR.

 

[MrSnrub]

I have attached an Excel workbook of my previous example on sheet1 and my latest account activity on sheet2. Please somebody evaluate it and show me where my errors are.

 

[evilanne]

Looks like they are excluding Loan Payments in their calculation. Backing into calculations based on your data, it appears that the difference is 1.5 X total loan payments

	PIP	Mr.Snrub	Difference
Gain	$‎ 7,426.77	$‎ 7,426.77
%age	9.87%​	10.8%​	-0.93%​
Gain/%	$‎ 75,245.90	$‎ 68,766.39	$‎ 6,479.51
Beginning Balance	$‎ (56,052.27)	$‎ (56,052.27)
	$‎ 19,193.63	$‎ 12,714.12	$‎ 6,479.51
		Loans Pmts	$‎ 4,394.78

 

[RazorCat]

All I know is my PIP improved noticeably when I reduced my monthly distribution to the minimum ($25.00).
No more distributions for a few years. May take a distribution when I hit 62 and my FERS supplement stops. Bridge the gap between 62, and when I decide to start drawing SS benefits. Although, I've been plugging the numbers into a couple of retirement calculators for a comparison between drawing at 62 vs. 66.5. Little, if any, difference in overall totals over the long haul.
RetirePlan for IOS (iPad and iPhone) is an excellent planner if anyone is interested.

 

[Valkyrie]

its to show how much one is being scrwe'd by Long and his cohorts by preventing everybody from doing their own daily re-balancing as they see fit.

 

[MrSnrub]

Looks like they are excluding Loan Payments in their calculation. Backing into calculations based on your data, it appears that the difference is 1.5 X total loan payments

	PIP	Mr.Snrub	Difference
Gain	$‎ 7,426.77	$‎ 7,426.77
%age	9.87%​	10.8%​	-0.93%​
Gain/%	$‎ 75,245.90	$‎ 68,766.39	$‎ 6,479.51
Beginning Balance	$‎ (56,052.27)	$‎ (56,052.27)
	$‎ 19,193.63	$‎ 12,714.12	$‎ 6,479.51
		Loans Pmts	$‎ 4,394.78

So, if we add 1.5 times the sum of loan payments to the equation, then that makes the formula as follows:

PIP = (EB - BB - Σ(all cash flows)) / (BB + Σ(Time-Weigted Cash Flows) + (1.5 * Σ(loan payment cash flows)))
    = (89854.59 - 56052.27 - 26375.55) / (56052.27 + 12724.39 + (1.5 * 4394.78))
    = 7426.77 / 75368.83
    = 0.098539011
    = 9.8539011%

This is pretty close. In the next couple days, I'll run the same formula on PIP results from other quarterly statements, and hopefully those will give the same results. Thanks.

 

[emily]

I just retired the end of December, transferred a portion out of the TSP in mid February, and started monthly payments at the same time. When I went to look at my PIP it said "Your PIP could not be calculated because your monthly account balances for the entire year were unavailable." Any ideas why it would show this?

 

[evilanne]

I just retired the end of December, transferred a portion out of the TSP in mid February, and started monthly payments at the same time. When I went to look at my PIP it said "Your PIP could not be calculated because your monthly account balances for the entire year were unavailable." Any ideas why it would show this?

It is probably the 1 time rollover in your situation would be an exception to what they normally deal with, which the system probably isn't programmed to deal with. Since you just took the withdrawal last month, I would be interested to know if they will fix that in future months or how long that will apply since I'm planning to do something similar.

Based on RazorCat's comment, I'm not sure how they factor monthly withdrawals in calculating your PIP, whether withdrawals would be considered a loss or if it would lower your PIP similar to Mr.Snrub's situation (excluding loan repayments along with the associated earnings from the PIP) or if it really matters.

You can always look at your activity summary in your online account and use the data to calculate it yourself.

P.S. You may want to save Mr.Snrub's spreadsheet/calculations below or get them once finalized.

 

[emily]

Thanks evilanne, I'll try to keep you updated if things change.

 

[blueroadster]

Based on RazorCat's comment, I'm not sure how they factor monthly withdrawals in calculating your PIP, whether withdrawals would be considered a loss or if it would lower your PIP similar to Mr.Snrub's situation (excluding loan repayments along with the associated earnings from the PIP) or if it really matters.

From what I have seen when I took out a TSP loan, the withdrawal did not have a negative impact on my reported PIP. The dollar amount taken out for the loan came from my employee traditional contributions. The confusion on how the PIP is actually calculated was the main reason why I track withdrawals and loan repayments made separately in my spreadsheet.

 

[RazorCat]

I watched my PIP closely in June as to what might affect it. My PIP for May was 20.42%. I was in G for all but 2 days in June. Sold and went to G on an up day, bought back in at the end of June on a down day, so didn't lose any money on my trades.
My PIP was 19.73% for June after being up (slightly) all month sitting in G. The only transactions I had was a $250.00 monthly withdrawal (and I suppose the administrative costs).
So, if withdrawals aren't being calculated as a loss as part of the monthly PIP I don't know what made my percentage drop.
Hey, no complaints. Been a good year so far.

 

[Intrepid_Timer]

It depends on what your return in June in 2016 was. If you made 4% in june of 2016 and 3% in June of 2017, your PIP is gonna drop 1%. It's IMPOSSIBLE to keep one's PIP increasing every month.

I watched my PIP closely in June as to what might affect it. My PIP for May was 20.42%. I was in G for all but 2 days in June. Sold and went to G on an up day, bought back in at the end of June on a down day, so didn't lose any money on my trades.
My PIP was 19.73% for June after being up (slightly) all month sitting in G. The only transactions I had was a $250.00 monthly withdrawal (and I suppose the administrative costs).
So, if withdrawals aren't being calculated as a loss as part of the monthly PIP I don't know what made my percentage drop.
Hey, no complaints. Been a good year so far.

 

[Scout333]

It depends on what your return in June in 2016 was. If you made 4% in june of 2016 and 3% in June of 2017, your PIP is gonna drop 1%. It's IMPOSSIBLE to keep one's PIP increasing every month.

Try tsp.gov for PIP info.

PERSONAL INVESTMENT PERFORMANCE

Q16. What is “Your YYYY Personal Investment Performance”?
The Personal Investment Performance (PIP) number is a combined rate of return earned on all of the funds you held in your TSP account during the year covered by the annual statement. Your personal performance is based on the performance of your investments and on the timing and amount of your purchases (e.g., contributions) and redemptions (e.g., loans and withdrawals) as well as the effect of any interfund transfers. Therefore, your personal performance may differ substantially from the performance of the investments themselves.
Q17. How does the TSP calculate Personal Investment Performance?
The TSP uses the Modified Dietz method to calculate Personal Investment Performance. The Modified Dietz method weights individual cash flows by the amount of time that those cash flows are held in the portfolio. This method of calculation is widely used by financial analysts and investment managers to measure the time-weighted returns of investment portfolios.
Q18. All of my money was in one fund during the year covered by the annual statement. Why is my Personal Investment Performance different from the rate of return of that fund?
The Modified Dietz method of calculation is sensitive to large cash flows (e.g., loans, withdrawals, rollovers, or even contributions if the account balance is relatively small) and to volatility in the markets.
If you were invested in one fund, and only one fund, during the statement year, cash flows into or out of that fund could cause the PIP rate of return on your statement to be slightly different from the fund’s rate of return.
Q19. Why doesn’t my annual participant statement show a Personal Investment Performance number?
If your TSP balance was $0 on the first or last business day of any month during the calendar year, an annual rate of return was not calculated, thus the Personal Investment Performance will not display on your statement. This particularly affects new and rehired participants.


How's your math skills? Ha!

 

[Intrepid_Timer]

I've read all that before. Doesn't change anything about my statement?

Try tsp.gov for PIP info.

PERSONAL INVESTMENT PERFORMANCE

Q16. What is “Your YYYY Personal Investment Performance”?
The Personal Investment Performance (PIP) number is a combined rate of return earned on all of the funds you held in your TSP account during the year covered by the annual statement. Your personal performance is based on the performance of your investments and on the timing and amount of your purchases (e.g., contributions) and redemptions (e.g., loans and withdrawals) as well as the effect of any interfund transfers. Therefore, your personal performance may differ substantially from the performance of the investments themselves.
Q17. How does the TSP calculate Personal Investment Performance?
The TSP uses the Modified Dietz method to calculate Personal Investment Performance. The Modified Dietz method weights individual cash flows by the amount of time that those cash flows are held in the portfolio. This method of calculation is widely used by financial analysts and investment managers to measure the time-weighted returns of investment portfolios.
Q18. All of my money was in one fund during the year covered by the annual statement. Why is my Personal Investment Performance different from the rate of return of that fund?
The Modified Dietz method of calculation is sensitive to large cash flows (e.g., loans, withdrawals, rollovers, or even contributions if the account balance is relatively small) and to volatility in the markets.
If you were invested in one fund, and only one fund, during the statement year, cash flows into or out of that fund could cause the PIP rate of return on your statement to be slightly different from the fund’s rate of return.
Q19. Why doesn’t my annual participant statement show a Personal Investment Performance number?
If your TSP balance was $0 on the first or last business day of any month during the calendar year, an annual rate of return was not calculated, thus the Personal Investment Performance will not display on your statement. This particularly affects new and rehired participants.


How's your math skills? Ha!

 

[Scout333]

IT this was for those who are not familiar with how PIP is computed. Not disputing your comment.