Question From a Reader – Calculating Personal Rate of Return

I received the following question from a reader:


Thank you for your site. I have found you present topics in easy to understand ways and also bring to light other sources of information that do the same.

I was reviewing your post on personal rate of return and I wanted to ask a question about 401Ks and personal ROR. In calculating your personal rate of return would you include company matching funds as part of the contributions? I could see it both ways, as the company match can be seen an immediate return OR the true returns are on the various investment vehicles you select within your 401K.

My response: Continue reading Question From a Reader – Calculating Personal Rate of Return

Figuring Your Personal Rate of Return

The Finance Buff has a very interesting post that details a simple formula that you can use to estimate your personal rate of return. I blogged about this very topic last year but my formula was incredibly detailed and would be a major pain for most people to use. To compute FB’s formula, the only information you need is:

1. The beginning balance
2. Net amount invested or deposited into the account
3. The ending balance

I’m not one to steal other people’s content, so you’ll have to head over to FB’s blog for a great example of how the formula works.

No, it probably isn’t totally accurate, but it will do a great job of giving you an idea of how you did. In fact, I ran the numbers on my wife’s 401(k) and came up with a personal rate of return of 17.3%, which is VERY CLOSE to the 17.2% that Fidelity reports. Pretty cool!

How to Calculate Your Personal Rate of Return

Here’s how to use XIRR in Excel.

First off, I want to thank the guys at the Vanguard Diehards Forum (and this forum in particular) for helping me out with this project. The post I put up earlier this week was wrong. I was following an example I had found in this Continue reading How to Calculate Your Personal Rate of Return