Monthly Rate Of Return Calculator

Monthly Rate of Return Formula:

\[ \text{Monthly RoR} = \frac{\text{Ending value} - \text{Beginning value}}{\text{Beginning value}} \times 100 \]

Monthly Rate of Return:

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1. What is Monthly Rate of Return?

The Monthly Rate of Return (RoR) measures the percentage gain or loss on an investment over a one-month period. It's a key metric for evaluating short-term investment performance and comparing different investment opportunities.

2. How Does the Calculator Work?

The calculator uses the Monthly Rate of Return formula:

\[ \text{Monthly RoR} = \frac{\text{Ending value} - \text{Beginning value}}{\text{Beginning value}} \times 100 \]

Where:

$ \text{Ending value} $ — Investment value at the end of the month ($)
$ \text{Beginning value} $ — Investment value at the beginning of the month ($)

Explanation: This formula calculates the percentage change in investment value over a monthly period, providing insight into short-term performance.

3. Importance of Monthly RoR Calculation

Details: Monthly RoR helps investors track short-term performance, identify trends, make timely investment decisions, and compare different investment vehicles. It's particularly useful for active traders and portfolio managers.

4. Using the Calculator

Tips: Enter the beginning and ending values in dollars. Both values must be positive, with the beginning value greater than zero. The result shows the monthly return as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What is a good monthly rate of return?
A: A "good" return depends on the investment type and risk tolerance. Generally, 5-10% monthly is excellent for stocks, while 1-3% is more typical for conservative investments.

Q2: How is monthly RoR different from annual RoR?
A: Monthly RoR measures one-month performance, while annual RoR shows yearly performance. Monthly returns can be annualized using compound interest formulas.

Q3: Should I include dividends in the calculation?
A: Yes, for accurate performance measurement, include all cash flows like dividends and interest in the ending value calculation.

Q4: Can monthly RoR be negative?
A: Yes, negative RoR indicates a loss for that month. This is common in volatile markets or with high-risk investments.

Q5: How often should I calculate monthly RoR?
A: Calculate monthly RoR at the end of each calendar month for consistent tracking and comparison across periods.