Sorry for this dumb amateur question, but looking for some help.
I’ve created an Excel line chart that tracks a portfolio’s annualized rate of return. For example, a year ago the portfolio had an annualized return of about 6.7%. Now it’s about 8%. The figure changes slightly each day and produces an interesting (to me) graph.
But I’m wondering: Is this type of chart (showing daily updates to annualized return) just nonsense?
Here’s why I suspect it is. One year after inception, if the portfolio gained 1% on a particular day, the annualized return also rose 1%. But now after three years, if the portfolio gains 1% in a day the change to the chart is maybe 1/3 of that. In other words: The sensitivity of the chart to the data is not constant. Does that invalidate the chart? And if so, is there a better way to track annualized return on a daily basis?