Personal Rate of Return Calculator
Calculate your money-weighted return (Modified Dietz) accounting for deposits and withdrawals.
Understanding Your Personal Rate of Return
Calculating investment performance isn't as simple as checking if your account balance went up. If you deposited money throughout the year, your balance might be higher, but that doesn't necessarily mean your investments performed well. Conversely, taking money out might make your balance look lower despite good market performance.
This calculator determines your Personal Rate of Return (also known as the Money-Weighted Return) using the Modified Dietz method. This approach is superior to a simple percentage calculation because it accounts for the timing of your cash flows.
Why "Simple Return" is Misleading
Imagine you start with $10,000. Halfway through the year, you deposit another $10,000. At the end of the year, your balance is $22,000.
- Simple Logic (Wrong): You ended with $22k and started with $10k. That looks like a 120% increase, but most of that growth came from your deposit, not investment skill.
- Personal Rate (Correct): You gained $2,000 on an average invested capital of roughly $15,000 (your starting $10k + the $10k deposit present for half the year). Your actual performance is closer to 13.3%.
The Logic Behind This Calculator
We use an approximation formula widely accepted in personal finance reporting. It assumes that, on average, your contributions and withdrawals happened halfway through the period.
Where:
- Gain or Loss: (Ending Value) – (Beginning Value) – (Deposits – Withdrawals)
- Net Cash Flow: Deposits – Withdrawals
How to Interpret the Result
A positive percentage indicates your investments grew organically, separate from the money you added. A negative percentage implies your investments lost value, even if your account balance grew due to heavy deposits.