How to Calculate Rate of Return on Investment Easily

Learning on how to calculate rate of return on investment is very easy. All you need to do is to compute your total invested capital and the earned profits. Profits are the interest earned, also called as “gains”. You have to use a simple return on investment formula in order to know if your investment is gaining or losing.

You need to know how much capital do you already have in an specific investment such as stock market, mutual funds, trust accounts, real estate or business ownership. The things you need when calculating ROI are as follows;

Total invested capital
Copy of participation, deposit slip
Calculator
Pen and Paper

How to Calculate Rate of Return on Investment

The procedures in calculating the total return of your invested capital are as follows;

Step One. Compute your total investment. Example, if you have a total investment in stocks worth $5,000, mutual funds capital worth $3,500 and bonds savings worth $2,000, therefore you have a total invested capital of ten thousand five hundred dollars.

Step Two. Next, find out how much your profit from different investment vehicle. You have to know the total interest earned of your investment in each instrument. Example, if you earned $700 in stocks, $500 in mutual funds and $300 in bonds, that means your total profits is $1,500.

Step Three. Add the value of your total invested capital and total profits. In our example, your total invested capital is $10,500 and your profit is $1,500. That means the total return on your investment is $12,000. Ten thousand dollars came from your pocket while the one thousand dollars are the profits. That means your investment gain at least 14.29%.

Step Four. Just subtract the total return with the original investment, and then, divide it by the original investment to get the exact percentage of the total profits.

Example ROI computation
$12,000 – $10,500 = $1,500
$1,500 / $10,500 = 14.29%

Tips & Warnings:

You need a ROI calculator if you want to make things faster and easy. But, it will be more interesting and exciting if you will calculate (ROI) return on investment manually. Make sure you are tracking your total invested capital. To make things not so complicated, keep all the official receipt or copy of participation whenever you invest money in stocks or mutual funds and even bonds.

You can use Microsoft excel whenever you want to calculate the rate of return on your investments.

Source and Citations: Originally written at InvestmentTotal.com by the blog admin on February 20, 2015. This article was update last February 20,2015. Please do share your knowledge on how to calculate rate of return on investment using the comment box below. Your suggestions and comments are highly appreciated.