Investment Rate Of Return Calculator With Withdrawals

Rate of Return Formula:

\[ RoR = \left( \frac{A + W - P}{P} \right) \times \frac{1}{t} \times 100 \]

Final Value (A):

₹

Total Withdrawals (W):

₹

Initial Principal (P):

₹

Time (t):

years

Rate of Return (RoR):

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1. What is the Rate of Return Formula?

The Rate of Return (RoR) formula calculates the percentage return on an investment over a specific time period, accounting for both the final value and any withdrawals made during the investment period.

2. How Does the Calculator Work?

The calculator uses the Rate of Return formula:

\[ RoR = \left( \frac{A + W - P}{P} \right) \times \frac{1}{t} \times 100 \]

Where:

\( A \) — Final value of investment (₹ or currency)
\( W \) — Total withdrawals made during investment period (₹ or currency)
\( P \) — Initial principal invested (₹ or currency)
\( t \) — Time period in years

Explanation: The formula calculates the annualized return percentage by considering the net gain (final value plus withdrawals minus initial principal) relative to the initial investment, then annualizing it based on the time period.

3. Importance of Rate of Return Calculation

Details: Calculating rate of return is essential for evaluating investment performance, comparing different investment opportunities, and making informed financial decisions about portfolio management.

4. Using the Calculator

Tips: Enter all values in the same currency. Final value and withdrawals should include any returns or amounts withdrawn. Time should be in years (can use decimals for partial years). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between RoR and other return metrics?
A: RoR provides a simple percentage return that accounts for withdrawals, unlike metrics that only consider final value without considering interim cash flows.

Q2: Can this formula handle multiple withdrawals at different times?
A: This simplified formula treats all withdrawals as a single total amount. For precise time-weighted returns with multiple withdrawals at different times, more complex calculations are needed.

Q3: What is considered a good rate of return?
A: Good returns vary by asset class and market conditions. Generally, returns should exceed inflation and be competitive with similar investment opportunities.

Q4: Does this formula account for compounding?
A: This is a simple annualized return calculation. For compound annual growth rate (CAGR), a different formula would be used that accounts for compounding effects.

Q5: Can I use this for negative returns?
A: Yes, the formula will calculate negative percentages if the net result (A + W - P) is negative, indicating a loss on the investment.