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Return With Withdrawals Formula:
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Return with withdrawals calculates the percentage return on an investment when withdrawals have been made during the investment period. It accounts for both the final value and any amounts withdrawn from the principal.
The calculator uses the formula:
Where:
Explanation: This formula calculates the net return percentage by subtracting both the principal and total withdrawals from the future value, then dividing by the principal.
Details: Accurate return calculation is crucial for investment performance evaluation, portfolio management, and financial planning. It helps investors understand the true performance of their investments after accounting for withdrawals.
Tips: Enter future value, principal amount, and total withdrawals in currency units. All values must be positive numbers with the principal greater than zero.
Q1: Why subtract withdrawals from the calculation?
A: Withdrawals represent money taken out of the investment, so they must be accounted for to calculate the true net return on the original principal.
Q2: What if I made additional contributions instead of withdrawals?
A: This formula is specifically for withdrawals. For additional contributions, a different calculation method would be needed.
Q3: Does this calculation account for the timing of withdrawals?
A: No, this is a simplified calculation that treats all withdrawals as a single sum. For precise time-weighted returns, more complex calculations are required.
Q4: Can this be used for any type of investment?
A: Yes, this formula can be applied to any investment where you know the principal, final value, and total withdrawals made.
Q5: What does a negative return indicate?
A: A negative return indicates that the investment lost money overall, even after accounting for any withdrawals made.