Investment Performance Calculator

What is an Investment Performance Calculator?

An Investment Performance Calculator is a financial tool used to measure and analyze the growth and return of an investment over a specific period. It takes into account the starting balance, ending balance, duration of investment, and any additional contributions or withdrawals to provide a comprehensive view of the investment's performance.

The Investment Performance Formulas

Two key formulas are used in investment performance calculations:

1. Total Growth Formula:

\[Total Growth = Ending Balance - Starting Balance - Total Credits + Total Debits\]

2. Annualized Return Formula:

\[Annualized Return = (\frac{Ending Balance}{Starting Balance})^{\frac{12}{Total Months}} - 1\]

Where:

• Starting Balance: The initial amount invested
• Ending Balance: The final value of the investment
• Total Credits: Additional contributions made to the investment
• Total Debits: Withdrawals made from the investment
• Total Months: The duration of the investment in months

Step-by-Step Investment Performance Calculation

1. Gather the necessary information: starting balance, ending balance, total months, total credits, and total debits.
2. Calculate the Total Growth using the Total Growth Formula.
3. Calculate the Annualized Return using the Annualized Return Formula.
4. Convert the Annualized Return to a percentage by multiplying by 100.

Example Calculation

Let's calculate the investment performance for the following scenario:

• Starting Balance: $10,000
• Ending Balance: $15,000
• Total Months: 24
• Total Credits: $2,000
• Total Debits: $500

1. Calculate Total Growth:

\[Total Growth = 15000 - 10000 - 2000 + 500 = $3,500\]

2. Calculate Annualized Return:

\[Annualized Return = (\frac{15000}{10000})^{\frac{12}{24}} - 1 = 0.2247 = 22.47\%\]

Visual Representation

The blue portion represents the starting balance ($10,000), the green portion represents the total growth ($3,500), and the remaining portion accounts for the net credits ($1,500).