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How to Calculate Personal Rate of Return (Time-Weighted Rate of Return)

By JLP | April 26, 2006

I pulled the content from this post because it is inaccurate. Here’s a link to the follow-up post.

Topics: Financial Math Basics, Personal Rate of Return, Time-Weighted Rate of Return | 9 Comments »


9 Responses to “How to Calculate Personal Rate of Return (Time-Weighted Rate of Return)”

  1. Leif Eriksen Says:
    April 26th, 2006 at 12:05 pm

    I would be interested in seeing your excel spreadsheet.

    I’ve seen two ways to calculate rate of return. The first is from the Association of Investment Management and Research (AIMR) in Charlottesville, Virginia. Their calculation is :

    Monthly Return = (EB – ½C + ½W) / (BB + ½ C – ½W)

    where BB is beginning balance, EB is ending balance. C is contribution during the period and W is withdrawal in the period.

    The other, which I think may be better, uses the XIRR function in Excel. I think it is better since it allows contributions/withdrawals that are more time dependent within the period being measured. It takes an annualized value (provided by XIRR) and converts it to a given period value. The formula is:

    ((XIIR result)+1)^((Ending date – Starting Date)/365)-1

    ^ is power of in Excel. Ending date – Starting Date gives you the number of days being used in the measurement.

    Regards,
    Leif

  2. shubham Says:
    April 26th, 2006 at 12:08 pm

    HI,

    I am a new reader of your blog and I find it really useful, maybe few months or years down the line I will also start a financial blog of mine :)

    If you can send the excel file to me I’d like to use it, though I dont invest right now.

    I am in the earning phase right now :)

  3. SB Says:
    April 26th, 2006 at 4:27 pm

    http://www.gummy-stuff.org/xirr.htm

    This is a very good explanation of XIRR.

  4. Free Money Finance Says:
    April 28th, 2006 at 5:32 am

    Star Money Articles for the Week of April 24

    Here are interesting posts and news this week from the MoneyBlogNetwork members and beyond: Consumerism Commentary discusses fancy weddings on a budget. AllFinancialMatters does some fancy math in telling us how to calculate personal rate of return. Mi…

  5. Omar Sharif Says:
    April 30th, 2006 at 1:47 pm

    Dear Sir:
    1. I want to know the excell sheet of Economic Rate of Return where the input value will be 1 time capital cost, 20 years Overhead and maintenance cost = total cost, and my benefits are ( Increasing land value, Increasing trade and business, saving Maintenance cost= total Benefits) and last Net Benefits after Finding out I will figure out whether I will invest for the Road or not for construction.

    (Non Revenue Project)
    Given,
    PV = 12%, year 20 years
    Find,
    Economic Rate of Return
    Benefit Cost Ratio
    Net Pesent Value

    2. Financial rate of Return of Construction of a building Input [One time capital cost O & M Cost for 20 years, Sell of Room, Rental value of rooms= total income, lastly Net Income all will decide me whether I will go for the construction or not,
    (Revenue Generating Project)

    Given,
    NPV Discount factor = 8%, year 20 years
    Find,
    Financial Rate of Return
    Benefit Cost Ratio
    Net Pesent Value

  6. Tony Says:
    October 11th, 2007 at 12:01 am

    I was planning on lending some money to a investment group. How can I calculate the return on a loan?

  7. Aaron Malo Says:
    June 2nd, 2008 at 10:13 pm

    I would love to see the excel spreadsheet of time weighted return as well?

  8. clayton woodrum Says:
    August 29th, 2008 at 6:29 am

    Please send me the excel spread sheet.

    Thanks

  9. David Gibbs Says:
    June 3rd, 2010 at 8:12 am

    I’d like to see the excel spreadsheet of time weighted return too.

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