Risk & performance

Time-Weighted Return — return that ignores the size and timing of your deposits/withdrawals. The fair comparison to a benchmark, because it isolates investment skill from cashflow timing.

Money-Weighted Return (a.k.a. IRR) — return that DOES account for the size and timing of your contributions. The honest measure of "how did MY actual money do".

Compound Annual Growth Rate — the constant annual return that would have produced the actual end value. Smooths the noisy year-on-year sequence into one number.

Capital gain + dividends + interest, all rolled into one number. Always quote total return, not price return, when comparing equities to fixed income or to an index.

How much you beat your benchmark by. +3% alpha means you returned 3 percentage points more than NGX-ASI over the same period. Hard to keep positive year after year — most professionals can't.

How much your portfolio moves with the market. β = 1 means it moves in lockstep with the index. β > 1 = amplifies the market; β < 1 = dampens. T-bills have β ≈ 0.

Return per unit of risk. Sharpe = (return − risk-free rate) ÷ volatility. >1 is good, >2 is exceptional. NGN risk-free is ~20%, so most NGX strategies score low; foreign sleeve scores higher.

Like Sharpe, but uses downside-only volatility in the denominator. Penalises losses without penalising upside moves. >2 is exceptional. Often a fairer measure than Sharpe.

Excess return per unit of market risk (beta). (Return − risk-free) ÷ beta. Useful when your portfolio is just one piece of a wider allocation; otherwise Sharpe is the better default.

Alpha ÷ tracking error. Tells you how reliably you beat the benchmark. >0.5 over multiple years is solid skill; >1.0 is rare.

Standard deviation of your portfolio's return MINUS the benchmark's return. Low tracking error = closet indexer; high tracking error = genuinely different bets vs benchmark.

How different your weights are from the benchmark's, as a percentage. Below 50% = closet indexer; above 80% = highly active. Higher active share = more upside AND more risk vs the benchmark.

How wildly your NAV swings. Measured as the standard deviation of daily returns, annualised. Lower vol = smoother ride; higher vol = more nausea.

The statistical measure of dispersion around the mean. In finance, applied to returns to quantify volatility. ~68% of returns fall within ±1 SD of the mean.

The worst peak-to-trough decline you've experienced. If NAV went ₦100M → ₦78M → ₦95M, max drawdown is -22%. Tells you the biggest historical 'oh god' moment.

Annualised return ÷ |max drawdown|. Tells you how much return you got per unit of worst-case pain. >0.5 is acceptable; >1.0 is exceptional in equities.

Share of portfolio in your top N positions. >40% in top 3 is concentrated; <20% is diversified. Concentration boosts returns when right and amplifies pain when wrong.

How tightly two assets move together. +1 = perfect sync, 0 = unrelated, -1 = move opposite. NGX equities and US tech ETFs are weakly correlated — that's why owning both adds diversification.

Value at Risk — the loss your portfolio shouldn't exceed on a typical day at a given confidence level. "95% 1-day VaR of ₦3M" means in 5% of days you lose more than ₦3M.

Also called CVaR — the average loss on the days that DO breach the VaR threshold. Captures the depth of the tail, not just where it begins. Always worse than VaR.

Decomposing portfolio return into contributions from asset allocation, security selection, and FX. Tells you whether you made money from skill or just from being in the right asset class.

Sustained decline of >20% from a recent peak. NGX bear runs have lasted 18-36 months historically. The discipline to keep buying through them is where decade-long wealth gets built.

Sustained advance of >20% off a low. NGX-ASI has had monster bull runs in 2017 and 2024. Discipline rule: don't confuse a bull market with personal genius.

Decline of 10-20% from a recent peak. Healthy and common — even in raging bull markets the NGX corrects 10% at least once a year. Distinct from a full bear market.