Estimate Your Portfolio Personal Rate of Return – Calculator

Updated and revised for 2014. Some of you may be wondering how well your specific portfolio performed last year (or over any specific period of time). Let’s say you started the year with $10,000 and put in another $5,000 through 10 different deposits spaced throughout the year, and ended up with $16,000. What was your rate of return? Your main goal is simply to separate the effect of new deposits (or withdrawals) and your actual return from investments.

Figuring out your exact personal rate of return requires you to know the exact dates of all your deposits and withdrawals, along with a financial calculator or spreadsheet program with an IRR function (example here). However, for a quick and simple estimate of your returns, try this calculator instead:

Initial Balance: $
Total Deposits: $
Total Withdrawals: $
Final Balance: $
Time period:   year(s)
Your estimated annualized rate of return:   %

Instructions

  1. Get your initial balance. This is probably from your brokerage statements. Try January of last year.
  2. Tally up any deposits or withdrawals. For example, let’s say you know you put $3,000 in your Roth IRA and also 5% of your $40,000 salary into a 401(k). That would be $3,000 + $2,000 = $5,000. That’s it, you don’t need to worry about looking up the specific dates and amounts.
  3. Get your final balance. Your December statement is probably available already.
  4. Find the time elapsed (in years) between your initial and final balances.
  5. Hit Calculate. An estimate of your annualized return is instantly given.

How Accurate Is This Estimate?
The calculator assumes that the inflows and outflows are spread evenly around the middle of the year. I originally saw this method in the book The Four Pillars of Investing (review). However, unless the deposits and withdrawals are very large as compared to the initial balance, the estimates are actually pretty good.

For example, let’s say that you start with $100,000 on 1/1/13, and end up with $120,000 on 1/1/14. If you had net deposits of $10,000 during the year, the calculator above would estimate your return at 9.52%. If the $10,000 was actually deposited all at once on one of these specific days, you would get the following exact returns:

Deposit Date Exact Return
1/1/13 (very first day) 9.1%
6/04/13 (middle of the year) 9.5%
1/1/14 (very last day) 10%
Estimate 9.5%

 

Also check out the rest of my Tools and Calculators.

Comments

  1. Great tool. Thanks for the information.

  2. Could you add 12 more fields, one for a deposit each month instead of a deposit for the entire year? And then weight them accordingly? :)

  3. I think this is a great little tool. Thanks Jonathan.

  4. My Fidelity statement says my personal rate of return is 12.4%, your calculator says 14.82%, not bad. Thanks!

  5. Thank you for this simple calculator! I tried some others but didnt’ have the right tools.

  6. Thanks! My portfolio came out as -0.99% for 2011 using your calculator.

    As a benchmark, the weighted return of my target portfolio using Vanguard index fund returns as proxies for each asset class was -0.79%, so I didn’t do too badly I guess.

    Bad years, they happen. At least it’s not 2008.

  7. I will have to try this. I’m a bit of a mathphobe, but this seems pretty easy.

    My question is, why can’t the mutual fund companies provide this to their customers? They seem able to customize everything else, and i don’t think this would be too much more trouble unless they just want to disguise actual returns

  8. Jeff Lebowski says:

    Jonathan,

    What has your personal IRR on your investments been?

  9. Well, if I did this right, my Vanguard portfolio earned 3.1% while my T. Rowe price portfolio got -1.49%.

    I think that makes sense, as my T. Rowe Price portfolio consists of just 2 funds and the bulk of them are in an Int’l Fund that’s really tanked this year

  10. If I’m reading the vanguard numbers correctly, i think the main reason my overall Vanguard portfolio returned over 3% is becus i Hhve $30,000 in Vanguard TIPS, which returned over 13% this year.

    Could it be I did something right for once??

  11. @Jeff – My IRR is in the low single digits, here’s my Jan 2012 portfolio update:

    http://www.mymoneyblog.com/inv.....-2011.html

    @fern – Vanguard does provide personal rate of return on their website somewhere, but I don’t recall seeing on statements. Fidelity also provides personal rate of return both on statements and online, last I remember. Wife’s 401k provider does so also, but most stock-centric brokers seem not to.

    TIPS and bonds in general definitely saved my return from being negative in 2011.

  12. This is a great way to see how your employer match helps you. If I include my true personal contributions only (i.e. the amount deducted from my paychecks, not including my employer match), my return for the year was 35%. My investments’ actual return? -9%.

    That’s a tremendous swing… Make sure you’re maxing out your company’s 401(k) match!!!

  13. Thanks for a great calculator, Jonathan! In which fields should commissions for sales and purchases go? Logically, I would have thought in the withdrawals section, but I’m not sure that’s right?

  14. Chris Ely says:

    Using your calculator, if I begin with $10,000, deposit 1000 and withdraw $1,000 and ending balance is $10,000 it give me (18.18%). Why is it not a 0% return?
    Thanks,
    Chris

  15. @Chris Ely – It does show a 0% return for me using those numbers.

  16. @Chris Ely – If you began with $10,000, deposited $2,000, and then still only ended up with $10,000 after 1 year, that would result in an estimated -18.18% return.

  17. Hi Jonathan,

    I still find this calculator useful – thanks for keeping it up! I’m a little nervous about it someday going away, though. Can you share some details about implementation (the math) so I can do the same calculation myself for evaluating my portfolio?

    Thanks!

    • I’m glad you find it useful, I should dust it off and update it a bit for 2014.

      The math behind the calculator is quite simple. I’m kind of short on time right now but I basically copied and pasted the following if you can follow some basic programing code. I’ll try to explain it better later.

      diff = (deposits - withdrawals)/2;

      returnEstimate = (finalBalance - diff)/(initialBalance + diff);

      annualizedReturnEstimate = returnEstimate^(1/years)); /* annualize */

      Convert to a percentage by subtracting 1 and multiplying by 100 and you’re done.

  18. Great tool! I could really use this one. Thanks!

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  1. [...] Your Portfolio’s Rate of Return – Estimation Calculator When trying to figure out your portfolio’s performance, don’t just trust the performance stats of your mutual fund or that number on your statement. Calculate it independently using this simple calculator. It gives surprisingly good estimates. [...]

  2. [...] Estimate Your Portfolio’s Rate of Return (Calculator) – Even an estimate can be pretty helpful. [...]

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