Investment Return With Withdrawals Calculator

RoR Formula:

\[ RoR = \frac{(A - P + \sum W_i)}{P} \]

Rate of Return (RoR):

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1. What is the Investment Return with Withdrawals Calculator?

The Investment Return with Withdrawals Calculator calculates the rate of return (RoR) on an investment that includes withdrawals during the investment period. It provides a comprehensive view of investment performance by accounting for both gains/losses and cash withdrawals.

2. How Does the Calculator Work?

The calculator uses the RoR formula:

\[ RoR = \frac{(A - P + \sum W_i)}{P} \]

Where:

\( RoR \) — Rate of Return (decimal)
\( A \) — Final Amount (currency)
\( P \) — Principal Amount (currency)
\( \sum W_i \) — Total Withdrawals (currency)

Explanation: The formula calculates the percentage return on investment by considering the final value, initial investment, and any withdrawals made during the investment period.

3. Importance of Rate of Return Calculation

Details: Accurate rate of return calculation is crucial for evaluating investment performance, comparing different investment options, and making informed financial decisions. It helps investors understand the true profitability of their investments after accounting for withdrawals.

4. Using the Calculator

Tips: Enter the final investment value in currency, the initial principal amount in currency, and the total withdrawals made during the investment period. All values must be positive numbers, and the principal amount must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good rate of return?
A: A good rate of return depends on the investment type, risk level, and market conditions. Generally, returns above inflation rate (2-3%) are considered positive real returns.

Q2: How does this differ from simple return calculations?
A: This calculation accounts for withdrawals during the investment period, providing a more accurate measure of actual investment performance compared to simple return formulas.

Q3: Can this calculator handle multiple withdrawals?
A: Yes, simply sum all withdrawals made during the investment period and enter the total amount in the withdrawals field.

Q4: What if I made additional contributions instead of withdrawals?
A: For investments with additional contributions, a different calculation method (such as time-weighted return or money-weighted return) would be more appropriate.

Q5: How should I interpret negative returns?
A: Negative returns indicate that the investment lost value overall, even after accounting for any withdrawals made during the period.