Originally Posted by jIMOh
Yeah I think my forumula is wrong too.
There is definitely something wrong with your formula.
If your starting value was 100,000 and you deposited 20,000 and at the end of the year you had 124,000 (matching inflation so no loss)
Your formula gives a -32% yield.
If you want one years return on investment and had a constant investment amount That number is simple enough to calculate. First of all to get how much you made vs. how much you should have made you need to have your ending value divided by what the ending value would have been with only inflationary growth.
Here's what you need (annual rate of inflation)/12=r This will be your expected monthly inflation rate. Normally annual inflation is 3% or 0.03.
Then you need to break up how much money was added assuming you added an equal amount each month (deposits)/12=D This is your monthly deposits.
S= starting balance
E= ending balance
IRR=investment rate of return
So now here's the equation:
To get IRR as a percentage subtract 1 and multiply by 100.
For the numbers you gave:starting value 41202
ending value 33226
Alan: for your numbers
Starting value = $373,467, Ending value = $287,890.
Total deposits = $25,383
your calculation gives 20% while website gives -29%
I get -29.87% looks like the website is rounding up to make your returns look a little less terrible.