How To Calculate Monthly Rate Of Return

Monthly Rate of Return Formula:

\[ \text{Monthly RoR} = \left( \frac{\text{Ending} - \text{Beginning} + \text{Dividends}}{\text{Beginning}} \right) \times 100\% \]

Monthly Rate of Return (RoR):

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1. What is Monthly Rate of Return?

Monthly Rate of Return (RoR) measures the percentage gain or loss on an investment over a one-month period. It accounts for both capital appreciation/depreciation and any dividends or income received during the month, providing a comprehensive view of investment performance.

2. How Does the Calculator Work?

The calculator uses the Monthly Rate of Return formula:

\[ \text{Monthly RoR} = \left( \frac{\text{Ending Value} - \text{Beginning Value} + \text{Dividends}}{\text{Beginning Value}} \right) \times 100\% \]

Where:

$ \text{Ending Value} $ — Investment value at month end ($)
$ \text{Beginning Value} $ — Investment value at month start ($)
$ \text{Dividends} $ — Total dividends received during month ($)

Explanation: The formula calculates the total return percentage by considering both price changes and income distributions relative to the initial investment.

3. Importance of Monthly RoR Calculation

Details: Monthly RoR is essential for tracking short-term investment performance, comparing different investment strategies, making timely portfolio adjustments, and assessing the effectiveness of investment decisions on a monthly basis.

4. Using the Calculator

Tips: Enter ending value in dollars, beginning value in dollars, and dividends in dollars. All values must be positive numbers, with beginning value greater than zero for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between monthly and annual RoR?
A: Monthly RoR measures one-month performance, while annual RoR shows yearly performance. Monthly returns can be annualized using compound interest formulas for comparison.

Q2: Should I include reinvested dividends?
A: Yes, include all dividends received during the month, whether taken as cash or reinvested, for accurate total return calculation.

Q3: What is a good monthly rate of return?
A: This varies by asset class and risk profile. Generally, 0.5-2% monthly is considered good for diversified portfolios, but context and risk level are important factors.

Q4: How does this differ from simple price return?
A: Monthly RoR includes dividends and distributions, providing total return, while price return only considers capital gains/losses from price changes.

Q5: Can negative monthly returns occur?
A: Yes, if the ending value plus dividends is less than the beginning value, the monthly RoR will be negative, indicating a loss for that month.