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How To Calculate Your Portfolio's Investment Returns

The article on Investopedia outlines several methods for calculating the returns and performance of an investment portfolio. It explains the importance of understanding both the total return, which includes income from dividends or interest as well as capital gains, and the time-weighted return, which accounts for the timing of cash flows into and out of the portfolio. Key metrics discussed include Simple Return, which measures the percentage increase or decrease in value over a period; Compound Annual Growth Rate (CAGR), which provides an annual growth rate over multiple periods; Holding Period Return (HPR), which calculates the total return over the entire holding period; and Risk-Adjusted Returns like the Sharpe Ratio, which considers the risk taken to achieve the return. The article also touches on the significance of comparing these returns against benchmarks like the S&P 500 to gauge performance relative to market standards. Additionally, it emphasizes the need for accurate record-keeping of all transactions to ensure precise calculations.

Read the Full Investopedia Article at [ https://www.investopedia.com/ask/answers/062215/how-do-i-calculate-my-portfolios-investment-returns-and-performance.asp ]

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