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Understanding investment performance

Your personal rate of return Add to ...

Your personal rate of return is determined using the total value of all of your investments, less the initial amount you paid for them and any fees you paid over a specific period of time, usually annually. Your personal rate of return is important to know because:

  1. It shows how much you’ve really made (or lost) – A personal rate of return shows how your investments have grown (or not) in a specific period of time.
  2. It’s not always disclosed – Not all mutual fund companies show your personal rate of return.

Calculating your personal rate of return

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You can ask your adviser to calculate your return for you, or you can calculate it yourself using a financial calculator or spreadsheet software.

To do this calculation, you will need:

  • the total value of your investments at the end of the previous year;
  • the total value of your investments at the end of the year for which you’re calculating your personal rate of return; and
  • the exact amount you invested during the year and the months in which you made the investments. Include any fees you paid to hold, buy and sell the investments, and consider taxes.

Once you have this information, use these steps to calculate your personal rate of return using a financial calculator or spreadsheet.

Now that you have your return, assess you progress against your goals, and measure your results against other investments.

Cost and performance disclosure requirements: The Canadian Securities Administrators (CSA) are implementing new requirements to ensure investors receive essential information about the costs and performance of their investments. Learn more about these new requirements.

Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca

Follow us on Twitter: @GlobeInvestor

 

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