What Is Asset Allocation? How to Think About Dividing Your Portfolio
May 21, 2026
8 min read
What Do the Numbers in Your Portfolio Tracker Actually Mean?
You've added your holdings and now there's a row of figures next to each position — gain, return, cost basis. Some look familiar. Others are puzzling. Here's a plain-English explanation of the most common numbers in a portfolio tracker and what they're actually telling you.
For educational purposes only. This article is not financial advice. Always consult a qualified financial professional before making investment decisions.
You've added your investments to a portfolio tracker. Now there's a row of figures next to each position — a gain in pounds, a percentage, something labelled "total return", maybe an annualised figure that doesn't quite match anything else on the screen.
Some of these numbers are intuitive. Others seem to contradict each other. And some measure subtly different things that matter more than they first appear.
This article explains what the most common portfolio tracker numbers actually measure, why the differences between them matter, and how to read them without getting confused. Nothing here is financial advice — these are explanations, not recommendations.
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Your Cost Basis: What You Actually Paid
Before any return can be calculated, a tracker needs to know your starting point — the price you paid for your investments. This is called your cost basis.
For a single purchase it's simple: if you bought 50 shares at £12 each, your cost basis is £600.
It gets more interesting when you've bought the same investment multiple times at different prices — which is what happens with dollar-cost averaging, dividend reinvestment, or simply adding to a position over time. In that case, the tracker calculates a weighted average cost per share.
Say you bought 50 shares at £10 and later bought another 50 at £14. Your average cost per share is £12 — the midpoint, weighted by the number of shares at each price. Your total cost basis is £1,200.
That average cost matters because it determines whether you're currently sitting on a gain or a loss, and by how much. It's also relevant for tax purposes when you eventually sell — though the exact tax treatment depends on your account type, jurisdiction, and personal circumstances, which is where a tax adviser earns their place.
FolioTrack calculates your average cost automatically as you add transactions, so the figures you see reflect your actual purchase history rather than just the most recent trade.
---
Unrealised vs Realised Gains
One of the most important distinctions in portfolio tracking — and one that catches people out — is the difference between unrealised and realised gains.
An unrealised gain (or loss) is the difference between what you paid for an investment and what it's currently worth, while you still hold it. It's a paper figure. You haven't received it. It can grow, shrink, or disappear entirely depending on what the price does before you sell.
If you bought shares worth £1,000 that are now worth £1,400, you have an unrealised gain of £400. It exists — but only on screen.
A realised gain is what you've actually locked in by selling. Once you sell, the gain (or loss) is fixed. It's no longer subject to market movement. And it's at the point of realisation that tax typically becomes relevant in most jurisdictions.
This distinction matters for two reasons. First, it affects how you think about your portfolio's performance — a portfolio full of unrealised gains can look very different by the time you need the money. Second, it affects tax planning, because realised and unrealised gains are treated very differently in most tax systems.
Your portfolio tracker will typically show both — open positions with their current unrealised gain or loss, and a history of closed positions with their realised figures.
---
Price Return vs Total Return
Here's a distinction that significantly affects how you read performance numbers, and one that's easy to miss.
Price return is simply how much the price of an investment has changed. If you paid £10 per share and it's now £11, the price return is 10%.
Total return includes everything — price changes plus any income the investment has generated. For a share that pays dividends, total return adds those dividend payments (whether received as cash or reinvested) to the price movement.
The gap between the two can be substantial over long periods. A stock that rises modestly in price but pays a consistent 4% dividend yield every year could have a total return significantly higher than its price chart suggests.
For income-focused investments — dividend stocks, bond funds, REITs — total return is the more complete and meaningful figure. Looking only at price change for these holdings understates what they've actually delivered.
When you compare your portfolio to a market index, it's also worth checking which version of the index is being used for comparison. Many commonly cited figures show price return only — the change in the index level. The total return version, which includes dividends reinvested, is usually higher. Comparing your total return to a benchmark's price return would flatter your performance unfairly; comparing it to the total return benchmark is the honest version.
---
Absolute Return vs Percentage Return
These two figures measure the same thing differently, and both matter.
Absolute return is the raw number: your portfolio is up £3,200. Percentage return puts that in context: your portfolio is up 16%.
The pound figure tells you the actual money involved. The percentage tells you how efficiently your capital has been working.
A £500 gain on a £1,000 investment is a 50% return. A £500 gain on a £50,000 investment is 1%. The pound figure is identical. The story is very different.
This is why percentage return is generally the more useful figure for evaluating performance — it normalises for how much capital was deployed. But absolute return matters too, particularly when thinking about what you actually have and what it can do for you.
Both figures can be misleading when looked at in isolation, which is why most trackers show you both and let you interpret them together.
---
Annualised Returns: Why Time Matters
If your portfolio has returned 40% over four years, was that a strong result or a weak one?
The raw percentage doesn't tell you much without knowing how it was spread across time. A 40% return in one year is exceptional. A 40% return over ten years is less so.
Annualised return (also written as CAGR — Compound Annual Growth Rate) converts a multi-year return into the equivalent annual rate that would produce the same overall result. It's a way of expressing performance in time-normalised terms so you can make fair comparisons.
A 40% total return over four years is roughly equivalent to a 8.8% annualised return. That's the annual growth rate that, compounded over four years, produces 40%.
The key word is compounded. An annualised return of 8.8% doesn't mean the portfolio grew by exactly 8.8% each year. Some years might have been up 20%, others flat, others slightly down. The CAGR is the single rate that, applied consistently, would have produced the same outcome. It's a smoothed representation of the journey rather than a description of it.
Annualised return is particularly useful for comparing investments held for different lengths of time, or for comparing your portfolio against a benchmark over a specific period. A five-year annualised return is directly comparable to another five-year annualised return, regardless of the year either investment started.
What it doesn't show is the volatility along the way. Two portfolios with the same five-year annualised return could have had dramatically different journeys — one smooth, one swinging up and down. Standard deviation and drawdown figures capture that, but that's a topic for another article.
---
Your Portfolio's Overall View
The numbers described above apply to individual holdings. When a tracker rolls everything together into a portfolio-level view, it's combining positions with different sizes, different holding periods, and different amounts of money added over time.
This is where the distinction between time-weighted return and money-weighted return becomes relevant — though most trackers make this choice for you without surfacing it explicitly.
Time-weighted return measures how the investments performed independently of when you added or withdrew money. It's useful for comparing your portfolio's performance to a benchmark or to a fund manager, because it removes the effect of your own contribution timing.
Money-weighted return (also called internal rate of return, or IRR) accounts for the timing and size of your contributions. If you put a large amount of money in just before a strong period, your money-weighted return will be higher than the time-weighted return for the same investments. If you added money just before a fall, it'll be lower.
Money-weighted return reflects your actual experience — the return you personally achieved on the money you actually invested. Time-weighted return reflects how the underlying investments performed, regardless of when you happened to buy in.
Neither is more "correct." They answer different questions.
---
What FolioTrack Shows You
FolioTrack calculates your cost basis automatically from your transaction history, tracks both unrealised and realised gains, and shows total return rather than price return — so dividends and income are included in your performance figures.
The performance view lets you compare your portfolio against major indices over the same time period, using total return for both so the comparison is fair. If your portfolio returned 14% and the relevant index returned 11% over the same period, the difference is meaningful context. If the comparison is inverted, that's worth knowing too.
The goal isn't to generate a number to be proud of — it's to give you an accurate picture of how your investments are doing, so any decisions you make are based on real information.
---
A Few Things Worth Remembering
Performance figures are always backward-looking. They tell you what happened, not what will happen. A strong historical return tells you the investment has done well in past conditions. It says nothing reliable about future conditions.
Short-term figures are noisy. A portfolio's one-month return is heavily influenced by timing and market noise. Longer periods — three years, five years, ten years — give you a more meaningful signal.
Fees reduce returns. If you're comparing your returns to an index benchmark, your performance is after any platform fees, fund charges, and transaction costs. The index figure generally isn't. Small fee differences compound significantly over long periods.
Currency movements matter if you hold international assets. A US stock up 10% in dollar terms might show a smaller or larger gain in pounds depending on how the exchange rate has moved over the same period. Good trackers handle the conversion transparently, but it's worth being aware that currency effects are folded into the figures you see.
Nothing in this article is financial advice. Understanding your portfolio's numbers is a starting point for informed thinking — not a substitute for professional guidance tailored to your individual situation.
---
The Short Version
The main numbers in a portfolio tracker measure different things: cost basis is what you paid; unrealised gains are paper profits you haven't locked in; total return includes income as well as price change; percentage return puts your gain in context relative to your starting capital; annualised return converts multi-year performance into a comparable annual rate. Understanding which number you're looking at — and what it does and doesn't tell you — is the foundation for reading your portfolio clearly.
Some of these numbers are intuitive. Others seem to contradict each other. And some measure subtly different things that matter more than they first appear.
This article explains what the most common portfolio tracker numbers actually measure, why the differences between them matter, and how to read them without getting confused. Nothing here is financial advice — these are explanations, not recommendations.
---
Your Cost Basis: What You Actually Paid
Before any return can be calculated, a tracker needs to know your starting point — the price you paid for your investments. This is called your cost basis.
For a single purchase it's simple: if you bought 50 shares at £12 each, your cost basis is £600.
It gets more interesting when you've bought the same investment multiple times at different prices — which is what happens with dollar-cost averaging, dividend reinvestment, or simply adding to a position over time. In that case, the tracker calculates a weighted average cost per share.
Say you bought 50 shares at £10 and later bought another 50 at £14. Your average cost per share is £12 — the midpoint, weighted by the number of shares at each price. Your total cost basis is £1,200.
That average cost matters because it determines whether you're currently sitting on a gain or a loss, and by how much. It's also relevant for tax purposes when you eventually sell — though the exact tax treatment depends on your account type, jurisdiction, and personal circumstances, which is where a tax adviser earns their place.
FolioTrack calculates your average cost automatically as you add transactions, so the figures you see reflect your actual purchase history rather than just the most recent trade.
---
Unrealised vs Realised Gains
One of the most important distinctions in portfolio tracking — and one that catches people out — is the difference between unrealised and realised gains.
An unrealised gain (or loss) is the difference between what you paid for an investment and what it's currently worth, while you still hold it. It's a paper figure. You haven't received it. It can grow, shrink, or disappear entirely depending on what the price does before you sell.
If you bought shares worth £1,000 that are now worth £1,400, you have an unrealised gain of £400. It exists — but only on screen.
A realised gain is what you've actually locked in by selling. Once you sell, the gain (or loss) is fixed. It's no longer subject to market movement. And it's at the point of realisation that tax typically becomes relevant in most jurisdictions.
This distinction matters for two reasons. First, it affects how you think about your portfolio's performance — a portfolio full of unrealised gains can look very different by the time you need the money. Second, it affects tax planning, because realised and unrealised gains are treated very differently in most tax systems.
Your portfolio tracker will typically show both — open positions with their current unrealised gain or loss, and a history of closed positions with their realised figures.
---
Price Return vs Total Return
Here's a distinction that significantly affects how you read performance numbers, and one that's easy to miss.
Price return is simply how much the price of an investment has changed. If you paid £10 per share and it's now £11, the price return is 10%.
Total return includes everything — price changes plus any income the investment has generated. For a share that pays dividends, total return adds those dividend payments (whether received as cash or reinvested) to the price movement.
The gap between the two can be substantial over long periods. A stock that rises modestly in price but pays a consistent 4% dividend yield every year could have a total return significantly higher than its price chart suggests.
For income-focused investments — dividend stocks, bond funds, REITs — total return is the more complete and meaningful figure. Looking only at price change for these holdings understates what they've actually delivered.
When you compare your portfolio to a market index, it's also worth checking which version of the index is being used for comparison. Many commonly cited figures show price return only — the change in the index level. The total return version, which includes dividends reinvested, is usually higher. Comparing your total return to a benchmark's price return would flatter your performance unfairly; comparing it to the total return benchmark is the honest version.
---
Absolute Return vs Percentage Return
These two figures measure the same thing differently, and both matter.
Absolute return is the raw number: your portfolio is up £3,200. Percentage return puts that in context: your portfolio is up 16%.
The pound figure tells you the actual money involved. The percentage tells you how efficiently your capital has been working.
A £500 gain on a £1,000 investment is a 50% return. A £500 gain on a £50,000 investment is 1%. The pound figure is identical. The story is very different.
This is why percentage return is generally the more useful figure for evaluating performance — it normalises for how much capital was deployed. But absolute return matters too, particularly when thinking about what you actually have and what it can do for you.
Both figures can be misleading when looked at in isolation, which is why most trackers show you both and let you interpret them together.
---
Annualised Returns: Why Time Matters
If your portfolio has returned 40% over four years, was that a strong result or a weak one?
The raw percentage doesn't tell you much without knowing how it was spread across time. A 40% return in one year is exceptional. A 40% return over ten years is less so.
Annualised return (also written as CAGR — Compound Annual Growth Rate) converts a multi-year return into the equivalent annual rate that would produce the same overall result. It's a way of expressing performance in time-normalised terms so you can make fair comparisons.
A 40% total return over four years is roughly equivalent to a 8.8% annualised return. That's the annual growth rate that, compounded over four years, produces 40%.
The key word is compounded. An annualised return of 8.8% doesn't mean the portfolio grew by exactly 8.8% each year. Some years might have been up 20%, others flat, others slightly down. The CAGR is the single rate that, applied consistently, would have produced the same outcome. It's a smoothed representation of the journey rather than a description of it.
Annualised return is particularly useful for comparing investments held for different lengths of time, or for comparing your portfolio against a benchmark over a specific period. A five-year annualised return is directly comparable to another five-year annualised return, regardless of the year either investment started.
What it doesn't show is the volatility along the way. Two portfolios with the same five-year annualised return could have had dramatically different journeys — one smooth, one swinging up and down. Standard deviation and drawdown figures capture that, but that's a topic for another article.
---
Your Portfolio's Overall View
The numbers described above apply to individual holdings. When a tracker rolls everything together into a portfolio-level view, it's combining positions with different sizes, different holding periods, and different amounts of money added over time.
This is where the distinction between time-weighted return and money-weighted return becomes relevant — though most trackers make this choice for you without surfacing it explicitly.
Time-weighted return measures how the investments performed independently of when you added or withdrew money. It's useful for comparing your portfolio's performance to a benchmark or to a fund manager, because it removes the effect of your own contribution timing.
Money-weighted return (also called internal rate of return, or IRR) accounts for the timing and size of your contributions. If you put a large amount of money in just before a strong period, your money-weighted return will be higher than the time-weighted return for the same investments. If you added money just before a fall, it'll be lower.
Money-weighted return reflects your actual experience — the return you personally achieved on the money you actually invested. Time-weighted return reflects how the underlying investments performed, regardless of when you happened to buy in.
Neither is more "correct." They answer different questions.
---
What FolioTrack Shows You
FolioTrack calculates your cost basis automatically from your transaction history, tracks both unrealised and realised gains, and shows total return rather than price return — so dividends and income are included in your performance figures.
The performance view lets you compare your portfolio against major indices over the same time period, using total return for both so the comparison is fair. If your portfolio returned 14% and the relevant index returned 11% over the same period, the difference is meaningful context. If the comparison is inverted, that's worth knowing too.
The goal isn't to generate a number to be proud of — it's to give you an accurate picture of how your investments are doing, so any decisions you make are based on real information.
---
A Few Things Worth Remembering
Performance figures are always backward-looking. They tell you what happened, not what will happen. A strong historical return tells you the investment has done well in past conditions. It says nothing reliable about future conditions.
Short-term figures are noisy. A portfolio's one-month return is heavily influenced by timing and market noise. Longer periods — three years, five years, ten years — give you a more meaningful signal.
Fees reduce returns. If you're comparing your returns to an index benchmark, your performance is after any platform fees, fund charges, and transaction costs. The index figure generally isn't. Small fee differences compound significantly over long periods.
Currency movements matter if you hold international assets. A US stock up 10% in dollar terms might show a smaller or larger gain in pounds depending on how the exchange rate has moved over the same period. Good trackers handle the conversion transparently, but it's worth being aware that currency effects are folded into the figures you see.
Nothing in this article is financial advice. Understanding your portfolio's numbers is a starting point for informed thinking — not a substitute for professional guidance tailored to your individual situation.
---
The Short Version
The main numbers in a portfolio tracker measure different things: cost basis is what you paid; unrealised gains are paper profits you haven't locked in; total return includes income as well as price change; percentage return puts your gain in context relative to your starting capital; annualised return converts multi-year performance into a comparable annual rate. Understanding which number you're looking at — and what it does and doesn't tell you — is the foundation for reading your portfolio clearly.
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