How do you calculate the % annual return rates for your investment?

When reading online articles & attending investment talks, typically there is a guide given that suggest you should strive to achieve XX% returns P.A. How do you calc this? I'm trying to check if I'm achieving my target.

Currently my Calc is
returns % per stock = (current price of stock + dividends to date) / cost of price of stock / no. of years * 100%

Is this correct?

Discussion (9)

What are your thoughts?

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Davin

24 Feb 2020

If you are buying regularly or irregularly, you can use XIRR (money weighted return) formula to calculate.

Just need to put the number into the excel and it will be automatically calculate.

Alternatively, I am using this apps call My Stocks Portfolio & Widget. My favourite apps that calculate all the numbers for my portfolio.

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Frankie Rappaport

23 Feb 2020

Hi Serene, to divide by number of years is only an approximation. Actually if you want to do it for a complete mixed portfolio plus irregular new investments, it get's quite complicated.

What you did (division by years) is arithmetic method, however geometric would be the right method and can be done for a single new investment (without dividends) easily with an excel sheet. The more complex situation above could be done with XIRR function if Excel, there are however completely different methods also.

For the simple one new stock, no dividend situation:

A = invested sum at trade date

B = current total value

C = number of days between the dates of A and B

formula for Excel:

% annualized return

=(((B/A)^(1/C))^365.25-1)*100

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