Tuesday, July 20, 2010
If an investment (i.e. mutual fund) starts off with $20,000 and is worth $22,000 at the end of the year, then you know that you earned a 10% return.
But, what if, during the course of the year, you invested an additional $100 per month during the year (for a total of $1200)?
You can't determine your return by dividing 22,000 by 21,200 because you did not have $21,200 invested since the beginning of the year.
You need to use regression analysis to calculate the exact return but, on my math blog, I wrote a post explaining a quick and dirty way to calculate the approximate return.
Labels: Personal Finance