Tracking how well your investments do is important. Without a clear idea of what kind of returns you’re getting, you’ll have no idea of whether you’re crushing the market or fettering your money away to those who are. As a long term investor, it isn’t necessary to panic about losing against the market on occasion. If I’m losing year after year, though, then it might be time to abandon active investing in favor of an index fund which will at least guarantee you’ll match the market (minus a modest management fee).
For a one-off investment, it’s easy to calculate annualized returns. Annualized growth of capital (or anything for that matter) is
((Current Value / Initial Value) ^ (1/years passed)) -1
For example, if you’ve doubled your money and it took three years, then your annualized return was 2 to the one-third power minus one, or just under 26%. This same formula is useful for calculating revenue and earnings growth of individual companies.
For an entire stock portfolio on the other hand, it isn’t possible to use such a simple process. As soon as you start adding money, which investors should be doing regularly, it becomes necessary to calculate a Net Asset Value before and after the addition of funds and dilute your asset growth calculation accordingly. It’s a messy messy process and the easiest way to deal with it is probably using the XIRR function on a Google spreadsheet.