How do you calculate total investment return? (2024)

Returns are always depends on time period of investment.Therefore for to get 1 year we use simple method.R = [CF1 + (Pt - P t-1)/ P t-1] *100Here, CF 1 : Any Cash flow with in given time frame 0 to1 yearPt : Price at time T.Pt-1 : Price at time 0.Similarly, when time is more than 1 year. Use natural log to calculate return in order to save from time variability.For more than 1 year, we use: R= Ln ( Pt / Pt-1 )Regards

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It's important to note that real estate returns can also be influenced by factors such as property taxes, maintenance costs, and financing expenses. Additionally, if you sell the property, transaction costs such as closing costs should be considered.

Total Income Return is useful metric for 2 reasons:1. Knowing returns that you have made on your portfolio- Backward looking 2. Evaluating & comparing options for investment- Forward lookingBroadly the complexity of calculating total investment return comes from different sources & timing of return. Let us take a simple example of a stock X that you sell after 2 years. Now return for X would be dividend distributed every year & the difference between buy & sell price.Dividend may be distributed every quarter, which gets reinvested. Whereas the price differential return comes only at the end of 2 years. In this case, it is important to use the different tools of IRR, XIRR & CAGR hand in hand to calculate the total returns

To calculate the net return, apart from absolute gains you also need to consider advisory charges, platform charges, etc., and taxes that you would be paying upon withdrawal.

Consider the time factor: It's crucial for investors to understand the significance of measuring returns over specific time frames, such as annually or quarterly, to evaluate performance accurately.Include reinvested income and gains: Highlighting the importance of reinvesting dividends or capital gains to compound returns can provide a more comprehensive understanding of total investment return. "The Importance of Time Horizon in Investing" - This article by Investopedia discusses the significance of considering the time factor when evaluating investment performance. It explains how different time frames can affect investment returns and provides insights into long-term investing strategies.

Total investment return is important for 2 reasons: 1. It is the real return that you have made on your portfolio2. While evaluating investment options, it becomes important to compare the choices. And what is the basis of comparison- It should obviously be total investment return. Whenever evaluation an investment, it is important to understand the source & timing of returns. For e.g. 1. In a house- Rental yield+ Price appreciation. 2. In a stock- Dividend+ Price appreciation3. In a bond- Only the coupons you get periodically

In looking at Total Returns you must also be able to dimension the period the return is being captured.To a client you must also be able to help them under stand the place of portfolio allocation, Risk and Investment Objective.

Few of the limitations are as below: Market Risk: Total investment return is subject to market fluctuations. If the market experiences a downturn, the value of investments may decrease, impacting the overall return.Liquidity Risk: Certain investments may lack liquidity, making it difficult to sell them at desired prices. This can affect the ability to realize gains or losses.Interest Rate Risk: Changes in interest rates can affect the returns on fixed-income investments. For example, when interest rates rise, bond prices tend to fall, impacting the overall return.Credit Risk: Investments in bonds or other debt instruments carry the risk of default by the issuer, impacting the return.Also Tax implications are not considered.

The best way to increase your returns is :Let us take a reference investment amount of 20,000/- per month.Calculate the average P/E ratio of Nifty.Every time Nifty goes above the average P/E by 1,i.e. let us say average P/E is 19 and it goes up to 20.Decrease your investments by 1,000 rs.AndEvery time Nifty goes below the average P/E by 1I.e. let us say average P/E is 18Increase your investments by 1000.This shall optimize your investment strategy and lead up to significantly better returns.

This is a fairly vague question because are we talking about a stock portfolio of retirement portfolio commercial real estate residential real estate?With residential Lending you've got your purchase price and closing costs and when you go to sell the property you've got your sales price minus all of the costs roughly 7% to include commissions title and escrow Etc the difference is your return or net. If it's a rental well your rent's better exceed your p.i.t.i.aI'm not a tax professional so tax questions should always be advised by a CPA

Use the following formula:Total Investment Return = (Ending Value - Beginning Value + Income) / Beginning ValueWhere:Ending Value: The current value of the investment.Beginning Value: The initial value of the investment.Income: The total income generated by the investment, including dividends and interest.Once you have calculated the total investment return, you can express it as a percentage by multiplying it by 100 .

From an Investor perspective its important to measure the real returns less inflation a good Investor would track this on quarterly or annual basis. Personally I want to see how my investment is doing when compared to my fellow investors in my sector. Constant returns is key as anyone can make returns on a up word makers but the winners who who can manage risk on downward markets.