If you are looking at different potential investments, such as stocks or mutual funds, one way to measure how well they performed in the past is their rate of return. The rate of return measures the increase or decrease in the value of the investment as a percentage of the original amount invested. However, the rate of return should not be the only factor you look at because past performance does not guarantee future results.
Subtract the amount the investment was priced at at the start of the period from the value at the end of the period. For example, if you were calculating the return on investment for a mutual fund for the past year and $3,400 invested at the start of the year would be worth $3,550 at the end of the year, you would subtract $3,400 from $3,550 to get a gain of $150.
Divide the gain or loss by the original value to find the rate of return as a decimal. In this example, you would divide $150 by $3,400 to get 0.04411.
Convert the rate of return to a percentage by multiplying the rate of return as a decimal by 100. In this example, you would multiply 0.04411 by 100 to find the rate of return for the year to be 4.411 percent.
