How to Calculate Periodic Investment Returns?

Investing in the financial market requires a deep understanding of the market and the investment strategies that can be employed to maximize returns. One of the key aspects of investing is calculating theperiodic investment returns, which is essential for monitoring the performance of an investment portfolio. In this article, we will discuss how to calculate periodic investment returns.

What is Periodic Investment Returns?

Periodic investment returns refer to the returns generated from an investment over a specific period of time. It is a measure of the increase or decrease in the value of an investment over a particular period. Periodic investment returns are expressed as a percentage and are calculated by comparing the initial investment value with the final investment value.

Calculating Periodic Investment Returns

To calculate periodic investment returns, you need to follow these simple steps:

Step 1: Determine the initial investment value

The initial investment value is the amount of money you invested in a particular asset at the beginning of the investment period. It could be the purchase price of a stock, bond, or any other investment.

Step 2: Determine the final investment value

The final investment value is the value of the investment at the end of the investment period. It could be the selling price of a stock, bond, or any other investment.

Step 3: Calculate the investment return

The investment return is calculated by subtracting the initial investment value from the final investment value and dividing the result by the initial investment value. The result is then multiplied by 100 to convert it into a percentage.

Investment Return = (Final Investment Value - Initial Investment Value) / Initial Investment Value x 100

For example, if you invested $10,000 in a stock and sold it for $12,000 after one year, the investment return will be:

Investment Return = ($12,000 - $10,000) / $10,000 x 100 = 20%

Interpreting Periodic Investment Returns

Periodic investment returns provide valuable insights into the performance of an investment portfolio. A positive return indicates that the investment has generated a profit, while a negative return indicates that the investment has incurred a loss. The higher the return, the better the performance of the investment. However, a high return does not necessarily mean that the investment is the best option. It is important to consider other factors such as risk, volatility, and liquidity before making an investment decision.

Conclusion

Calculating periodic investment returns is an essential aspect of investing. It enables investors to monitor the performance of their investment portfolio and make informed decisions. By following the simple steps outlined in this article, investors can calculate the periodic investment returns of their investments. However, it is important to remember that investment decisions should not be based solely on returns. Other factors such as risk, volatility, and liquidity should also be considered.