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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76112  
Subject: Re: How to calculate rate of return Date: 9/19/2008 12:43 AM
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Hi Fletch

Depending on how "accurate" you wanted to be?

Paul showed a simple way to look at the problem. Just take the amount lost, annualize that and then calculate the return. This gives a pretty good estimate

Another way to look at this would be to say you lost $1500 per month.

So you started with $70,000, lost $1,500 over a month dropping the account to $68,500 and then contributed $1,500 to get back to $70,000.

So $68,500/$70,000 shows you get 97.9% returned or call it a 2.1% loss rate per month. Which you annualize by raising that to the power of 12 (number of months)

( .979 )^12 which is .775 (77.5%) returned or a 22.5% annualized loss rate

and then depending on your timing for contributions - and final end date you could adjust the estimate even closer.
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