YTD stands for "year to date," which refers to how a stock has done since the start of the calendar year. Like any most other measures of performance, the higher the YTD return, the better the stock is doing. However, the YTD return can be misleading if you don’t take into account the time at which you’re measuring it.
YTD Formula
To figure the YTD performance, subtract the price of the stock at the start of the year from the current price of the stock. Then, divide the result by the price of the stock at the start of the year. Finally, multiply by 100 to convert the result to a percentage. For example, say the stock started the year at $90 and now it’s grown to $98. First, subtract $90 from $98 to get a raw increase of $8. Then, divide $8 by $90 to get 0.0889. Finally, multiply by 100 to get an 8.89 percent YTD gain.
Dividend Effects
If your stock paid dividends, you also have to account for those by adding them to stock’s current price when figuring the YTD. When a company pays a dividend, the stock price typically goes down by the amount of the dividend per share, but as an investor, you haven’t lost anything because you have that money in your pocket. For example, say that the stock price is up to $98 from $90, but it’s also paid a $2 dividend. Instead of an $8 per share gain, the gain is actually $10 per share, which is about an 11.11 percent gain, rather than just the 8.89 percent return.
Advantages
The YTD performance takes into account the exact time period for any stock -- assuming it’s measured on the same day. For example, if you’re measuring the returns on two different stocks in your portfolio, the raw returns can be drastically changed depending on how long you’ve owned each stock. It also measures the return as a percentage, so that you can compare returns of different sized investments. For example a $100 return on a $1,000 investment is pretty good, but if you invested $100,000 and only earned $100, you’d be wishing you’d made more.
Limitations
The YTD performance doesn’t adjust for the amount of the year that’s passed during the year -- it always measures from the beginning of the year. So, whether the YTD performance is good or not depends in part on what time of the year you’re measuring the gain. For example, a 1 percent YTD gain might be great in the first month, but if it’s December and the YTD gain is only 1 percent, you might not be so happy with the stock anymore.
