What is Year To Date (YTD)?
Definition: In accounting, year to date (YTD) is the period between day one of a fiscal or calendar year and the current date. There is no specific measurement for the YTD period so any number of days can do.
It could be one just one day since the start of the normal calendar year. In accounting, institutions mostly use the fiscal year, which sometimes coincides with the calendar year.
Year to Date Period Explained
Year to date is an important concept especially among the management, shareholders, auditors, and financial analysts. Focusing on the YTD period enables the stakeholders to compare the performance of the company since the start of the fiscal year with historical performance. For shareholders, focusing on YTD enables them to figure out their investment strategy for the rest of the fiscal year.
Important to note, there is a difference between fiscal year and calendar year. On the one hand, the calendar year starts from 1 January. It focuses on the days of the calendar from starting 1 January and ending 31 December. On the contrary, a fiscal year represents the number of months that form an accounting period for a business or government agency. Usually, businesses and government agencies need to reveal their financial statements at the end of the fiscal year for a range of purposes, including for external auditing. The reporting period falls within the fiscal year to ensure order and relevance in the financial reports.
It is critical to keep in mind the difference between the calendar year and the fiscal year because different companies use different systems. For instance, the fiscal year for many companies in the US, including Microsoft, starts on 1 October and ends on September 30. Other companies’ fiscal year starts from 1 July and ends on June 30. The difference is important especially when you want to compare the YTD performance of two companies. It is always prudent to ensure that the companies you are comparing use a similar period for fiscal year. This avoids the problems of seasonal changes during the year, which might produce wrong results.
Portfolio returns based on YTD
Besides helping management to review interim financial statements of companies, YTD is crucial when analyzing portfolio returns. When an investor constructs a portfolio, the ultimate goal is to earn the highest returns as possible and in the shortest time. However, this requires constant adjustment of the portfolio. To this end, investors occasionally calculate returns on a portfolio on a YTD basis. The aim of this calculation is to ascertain that the returns on the portfolio are good. If there is a problem (i.e. the returns are poor), then there is need for portfolio readjustment.
Below is the formula for evaluating the YTD return on a given portfolio for an investor that uses the calendar year:
This formula is applicable to fiscal years that begin at any point. All you need is the value of the portfolio at the opening date of the fiscal year and the value at the current date. Besides evaluating the YTD return on a portfolio, the formula is ideal for calculating company costs, sales figures, earnings, securities returns and more.
Year to Date Example
A financial investment expert constructs a stock only portfolio for Susan with an initial investment of $100,000 on March 31, 2019. To diversify the portfolio, the expert selects stocks from different industries as well as blue chip stocks and a few penny stocks. As at October 31, 2019, the value of the portfolio has grown to $175,720. Now, Susan would like to know the year to date return on her portfolio.
| Date | Portfolio Value |
| March 31, 2019 | $100,000 |
| October 31, 2019 | $175,000 |
To that end, Susan can use the year to date formula return on a portfolio:
Substituting the values in the YTD formula:
= (0.75 x 100) percentage = 75%.
Hence, the return from Susan’s portfolio is 75% YTD.