1. Overview
Unitising a portfolio is a simple accounting method that allows an investor to measure performance accurately over time, regardless of cash added or withdrawn. It treats your portfolio like a fund, where performance is tracked through changes in a unit price rather than changes in total value.
This approach is widely used by professional fund managers but rarely by private investors, despite being straightforward to implement.
2. The Problem Unitisation Solves
Most private investors measure performance by looking at how much their portfolio is worth today compared with the past. This is misleading when money is added or removed over time.
Regular contributions, lump sums, or withdrawals distort returns. A portfolio can appear to perform well simply because more cash was added, not because the investments performed well.
Unitisation removes this distortion.
3. What Unitisation Means
Unitisation means seeing your portfolio as a number of units, where a unit has a value measured in your currency) that depends on performance... not on how much you may and add or withdraw. it is still or expired with the value of each unit being the total value of the portfolio divided by the number of units notional units, each with a changing price.
You are not changing what you own.
You are changing how you measure it.
Performance is measured by the movement in unit price, not by the size of the portfolio.
4. How To Unitise A Portfolio
Step one. Choose a starting unit price.
This can be £1, £10, or £100. The number is arbitrary.
Step two. Calculate the number of units.
Divide the total value of your portfolio by the chosen unit price.
Example.
A £50,000 portfolio with a £100 unit price equals 500 units.
5. Tracking Performance Over Time
As markets move, the value of your portfolio changes but the number of units stays the same.
If the portfolio rises from £50,000 to £60,000, the unit price rises from £100 to £120.
Your return is the change in unit price.
In this case, 20 percent.
6. Adding Or Withdrawing Money
When you add money, you buy new units at the current unit price.
Example.
If the unit price is £120 and you add £6,000, you buy 50 new units.
When you withdraw money, you sell units at the current unit price.
This ensures that cashflows do not affect performance measurement.
7. What Unitisation Gives You
Unitisation produces a time-weighted return.
This allows:
• Accurate long-term performance tracking
• Fair comparison with funds and benchmarks
• Clear separation of investment skill from saving behaviour.
It shows how well your investments performed, not how much money you happened to add or withdraw.
8. Unitisation Versus Other Measures
Unitised returns are 'time-weighted'.
By contrast, measures such as XIRR are money-weighted and reflect the timing of cashflows. Both have value, but they answer different questions.
Unitisation answers one question only.
“How well did my portfolio perform?”
9. Why Most Private Investors Do Not Use It
The main reason is not complexity.
It is simply that they are not familiar with it.
Most platforms do not present data this way, and investors are rarely taught to think like fund managers. Yet the method is simple, transparent, and robust.
10. Conclusion
Unitising your portfolio turns performance measurement from guesswork into a clean, professional process. It strips out noise, removes cashflow distortion, and lets you judge your investing decisions on their merits.
Once adopted, it becomes very hard to go back.... for sure.
Glossary
Unitisation
Treating a portfolio like a fund by dividing it into units whose price reflects performance.
Time-weighted return
A measure of investment performance that shows how well the investments themselves performed, ignoring when or how much money was added or withdrawn. It is the standard method used by fund managers because it removes the effect of personal saving decisions and focuses purely on investment skill.
Further reading:
https://monevator.com/time-weighted-return/
https://www.investopedia.com/terms/t/time-weightedror.asp
Money-weighted return
A measure of return that takes account of the timing and size of cashflows, such as contributions and withdrawals. It reflects the investor’s personal experience, meaning good or bad timing can materially change the result even if the underlying investments performed the same.
Further reading:
https://monevator.com/money-weighted-return/
https://www.investopedia.com/terms/m/money-weighted-return.asp
Now then now then...
You drop 500 into your portfolio does this change the value of your portfolio does this change the number of units in your?
You receive a dividend does this increase the number of units or the value of a unit?
How will you track and compare your performance with the index of your choice?
Source
To read attentively! :
Monevator - a great site for investors of all ages and skills.
How to Unitize Your Portfolio
https://monevator.com/how-to-unitize-your-portfolio/
A Worked Excel example
That's article above includes a Excel spreadsheet to download and adapt. Here's a ready-to-paste example. Ready to drop straight into Excel or Sheets.
Worked Excel Example – Unitised Portfolio
Date | Portfolio Value | Cashflow | Units Outstanding | Unit Price
01-Jan | 50000 | 0 | 500 | 100.00
01-Feb | 55000 | 0 | 500 | =B2/D2
01-Mar | 65000 | 10000 | =D2+(C3/E2) | =B3/D3
01-Apr | 70000 | 0 | 590.91 | =B4/D4
01-May | 65000 | -5000 | =D4-(ABS(C5)/E4) | =B5/D5
Key Excel Formulas (Copy Once)
Unit price:
=B2/D2
Units added (cash in):
=C3/E2
Units removed (cash out):
=ABS(C5)/E4
Interpretation
Performance is the change in Unit Price only.
Cashflows do not affect performance.
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Keep it clean, keep it lean