Math Question: Calculating Annualized Rate of Return

[scfr]

I'll admit that I'm a bit embarassed to ask, because I feel I should know this but.....

How do you calculate the annualized rate of return for your total portfolio for a one month period?

Here are some made-up numbers as an example:
Total Portfolio, start of the month = $100,000
Interest/Dividends/Capital Gains received during the month = $1,000
Added Savings = $1,000
Total Portfolio, end of the month = $102,000

This is how I think you would calculate it:

Int&Div&Cap Gains / Average of Starting and Ending Portfolio amounts * 12 months = $1,000 / $101,000 * 12 = 11.9%

BTW, I'm not concerned about whether a month has 28 or 30 or 31 days, since that will all average out over the course of a year.

What I'm not sure about is whether you use your Starting Portfolio amount, your Ending Portfolio amount, or the Average of the two (as I did in my example).

Thanks in advance to anyone who can help me!

[puck36]

Well let me know if I'm wrong or not but this is what I came up with.

Ending Amount divided by the Starting amount times 100 = Return on investment

Next compute the number of time period or holding period (the number of days, weeks, months, etc.) that you held your investment and divide it into the annual equivalent. In other words, 365 days = xxx number of days. 52 weeks = xxx number of weeks. 12 months = xxx number of months.

12 (number of months) divided by 1 times Rate of return = annualized rate of return

so for your example

102,000 divided 100,000 times 100 = 102%

12 divided 1 times 102 = 1224%

so the annualized rate of return is 1224%

[SavedintheCity]

Wikipedia knows all:

http://en.wikipedia.org/wiki/Return_...Annual_Returns

[scfr]

Originally Posted by SavedintheCity

Wikipedia knows all:

http://en.wikipedia.org/wiki/Return_...Annual_Returns

I may be missing something, but I don't see where this factors in the additional savings over the course of the month (in my example, $1,000). If no savings were added during the month, the return would be much easier to calculate....

[tinapbeana]

by my calculations your annual rate of return is approximately 11.88%. i have attached a spreadsheet (zipped up per forum requirements) i use to 'guesstimate' my savings projections, and it takes monthly contributions into account.

[scfr]

Originally Posted by tinapbeana

by my calculations your annual rate of return is approximately 11.88%. i have attached a spreadsheet (zipped up per forum requirements) i use to 'guesstimate' my savings projections, and it takes monthly contributions into account.

Thanks so much - 11.88% was the figure I got and I rounded off to 11.9%.
I guess I'll just keep on calculating that way.