How to Calculate Your Portfolio's Investment Returns

For investors, understanding the performance of their portfolio is essential. Knowing how much return you are generating on your investments can help you understand which investments are performing well and which ones are not. But calculating your portfolio’s return isn’t always straightforward. In this blog post, we’ll discuss how to calculate the returns on your investments in a few simple steps.

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Step 1: Gather all of your investment information, including purchase prices and current market values. It's important to have an accurate overview of your investment portfolio in order to accurately calculate returns. This includes any stocks, bonds, mutual funds, and other investments that you may have purchased over time.

Step 2: Calculate the total cost basis for all of your investments by adding up the amount you paid for each investment when you purchased it (this is also known as your cost basis). This will give you a good idea of how much money you have invested in total.

Step 3: Calculate the total market value for all of your investments by adding up the current market value for each individual investment. This will tell you how much money those same investments are worth today.
                                 
Step 4: Subtract Step 2 from Step 3 to get your total portfolio return. This is a simple calculation that will tell you how much money you have made (or lost) on your investments since they were purchased. Keep in mind that this figure does not take into account taxes or other fees associated with investing such as broker commissions or management fees, so it’s best used as a general indication of performance rather than an exact figure.
                     
Conclusion

Calculating the return on an investment portfolio can be a daunting task for small investors who are just starting out with investing or who do not have access to sophisticated tools and platforms like larger institutional investors do. However, with a little bit of time and effort, it can be done using the four simple steps outlined above—gathering information, calculating cost basis and market value, and subtracting one from the other to get the total portfolio return—to get an accurate picture of how well (or poorly) their investments are performing over time. With this information in hand, small investors can make more informed decisions about their portfolios going forward.

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