How to calculate rate of return?

[Condi]

Daft question which has annoyed me for a few days...

I have a pension which I/the company, put X amount of money into per month.
The site I use to track it shows an investment gain of Y over the last 12 months.

How can I work out what my yield/rate of return is? I cant use the value 12 months ago, because the contribution from 11 months ago is also included and had 11 months of increase in value, and then investment 10 months ago would have had increase in value.... etc.

I feel like it should be some kind of (n*12)+(n*11/12)+(n*10/12).... etc, but its been a long time since school.

Is there an easy answer?

[psi310398]

I think you are looking for the TWRR (Time Weighted Rate of Return) function in Excel.

I'm sorry, but I'm too pooped now to try to explain it but this is a link to a template which should be adaptable for your purposes:

http://www.financialwisdomforum.org/gummy-stuff/ti...

HTH

[anonymous-user]

Condi said:

Is there an easy answer?

When I want a rough answer,

• You know value at start of year.
• You know value at end of year.
• You know how much has gone in each month.
• At the end of the year you know that, on average, half of your new contributions have been in for the full year.

Got it?

So, for your value at start of year use actual value at start of year + half the new money that's gone in.

[HootersGsy]

There's an Excel function called XIRR. You enter a table of cashflows (negative numbers being investment into the fund), and a final value being the market value with todays date. XIRR will then calculate your return.

[anonymous-user]

rockin said:

When I want a rough answer,

• You know value at start of year.
• You know value at end of year.
• You know how much has gone in each month.
• At the end of the year you know that, on average, half of your new contributions have been in for the full year.

Got it?

So, for your value at start of year use actual value at start of year + half the new money that's gone in.

.... Wouldn't you also: for value at end of the year use actual value at end of year LESS half the new money that's gone in?

OP, take a look at Modified Dietz calculation.

[sidicks]

Hang On said:

.... Wouldn't you also: for value at end of the year use actual value at end of year LESS half the new money that's gone in?

OP, take a look at Modified Dietz calculation.

Surely this is extremely easy to calculate with a basic spreadsheet, so why bother with approximations?

[Jockman]

Looks like a similar calculation to that used for Regular Savers.