Author Topic: Calculating monthly investment annual return?  (Read 3941 times)

EarlyRetirementGuy

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Calculating monthly investment annual return?
« on: August 26, 2014, 05:50:42 AM »
Hello all,

Trying to get my head round the maths of this and hoping someone might know an easy way to do it or link to an online tool.

Is there any way to calculate the rate of return (per year?) on an amount which has been invested monthly?

Ie: If I invest 100 a month for 12 months, I'll have invested 1200 over the year however my fund platform only shows the % gain of the entire amount. So if it's currently at 1320 it calculates a gain of 10% whereas I havnt actually had the full 1200 in the account for the whole year and so the average % gain should be different? I Think?


Hope this makes sense. It's been a long time since I've had to work out compound interest type stuff. Thanks!

abyss

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Re: Calculating monthly investment annual return?
« Reply #1 on: August 26, 2014, 07:37:54 AM »
If you're using a spreadsheet the function you want is XIRR().

I don't have a good tutorial link handy, but google should turn up something (possibly even somewhere on this forum).

EarlyRetirementGuy

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Re: Calculating monthly investment annual return?
« Reply #2 on: August 26, 2014, 07:49:01 AM »
If you're using a spreadsheet the function you want is XIRR().

I don't have a good tutorial link handy, but google should turn up something (possibly even somewhere on this forum).

Perfect, thanks! Shows my rate of return to be 8.2% over the past year instead of the 5.5% shown on the fund platform. This is about what I was expecting :)

Roland of Gilead

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Re: Calculating monthly investment annual return?
« Reply #3 on: August 26, 2014, 08:01:47 AM »
Your annualized return is an interesting number and would be based on the current amount invested, the return on that amount, and the projected return for the year if the investment continues at the same rate.

If you invest $100 in January and it makes $20 the first month, your annualized return is (1-1.20^12) * 100% = 791%


EarlyRetirementGuy

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Re: Calculating monthly investment annual return?
« Reply #4 on: August 26, 2014, 08:06:49 AM »
Your annualized return is an interesting number and would be based on the current amount invested, the return on that amount, and the projected return for the year if the investment continues at the same rate.

If you invest $100 in January and it makes $20 the first month, your annualized return is (1-1.20^12) * 100% = 791%

I started the passive investing exactly a year ago so all the timings match up nicely.

Your example must assume it continues to make $20 + compound each month without further investment?
« Last Edit: August 26, 2014, 08:10:27 AM by EarlyRetirementGuy »

Roland of Gilead

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Re: Calculating monthly investment annual return?
« Reply #5 on: August 26, 2014, 08:20:58 AM »
Your annualized return is an interesting number and would be based on the current amount invested, the return on that amount, and the projected return for the year if the investment continues at the same rate.

If you invest $100 in January and it makes $20 the first month, your annualized return is (1-1.20^12) * 100% = 791%

I started the passive investing exactly a year ago so all the timings match up nicely.

Your example must assume it continues to make $20 + compound each month without further investment?

Yes, exactly.

I use it sometimes to evaluate if I should take early gains.   Taking 5% on an investment you made a few days before doesn't sound so great until you realize that the annualized return in in the thousands of %.

Gone Fishing

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Re: Calculating monthly investment annual return?
« Reply #6 on: August 26, 2014, 09:25:31 AM »
Not to say don't try.  But don't get too wrapped up in calculating your returns (unless you are just a serious Excel egghead and it makes you happy), as it gets mighty complicated if you are making  incremental investments over time.  If you are comparing securites/CDs it is not terribly difficult to determine annual returns using provided data.  If you are comparing real estate to securities things are quite a bit tougher.  I read an article a while back that determined that investing behavior (savings rate) was more important than absolute returns (within reason).     

Gone Fishing

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EarlyRetirementGuy

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Re: Calculating monthly investment annual return?
« Reply #8 on: August 26, 2014, 09:30:18 AM »
Found it:

https://www.mint.com/blog/saving/why-your-savings-rate-may-be-more-important-than-your-rate-of-return-102011/

A good article.

I was looking to get an idea of my fund growth over the past year as a percentage. I focus on the savings percentage far more month-to-month.

 

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