Understanding Your Rate of Return
However, this lack of interest and understanding sometimes lead us to unwise decisions that involve losing a considerable amount of money. Oftentimes, it is already too late when we realize we made a huge mistake in investing or selling our investments, such as selling an annuity, for example.
Do you know how to compute the rate of return on selling an annuity to make sure you are doing the right thing? It is also this lack of knowledge that gives fake companies the leverage to prey on unsuspecting and trusting investors who do not know better. The number of scammers wouldn’t be increasing if only we know our numbers, even at least the basics.
What is a Rate of Return?
Rate of Return, also called return on investment—ROR or ROI for short, is the ratio of money gained or lost in relation to the initial amount of investment. Also simply called as return, it is the rate of profit or income you earn from your investment measured in percentages. It is oftentimes measured in annual or annualized rate of return on a specific calendar or fiscal year. This is your tool in determining how much your investment is gaining or losing, if it is appreciating or depreciating.
How to Compute Rate of Return
The rate of return is measured in percentages because monetary values cannot show a comparative relation of the gains and losses with the initial investment. For example, if you measure the gains of a $1,000 intial investment through a $50 interest and compare it with a $100 investment through its $20 interest, the $1000 investment would seem to be earning much more that the $100 investment.
However, further computation using percentage of the rate of return would prove otherwise. The $50 you are earning from your $1,000 investment is only 5% of your initial investment while the $20 you are earning from the $100 investment is 20% of your initial investment. In the long run, your rate of return from the $100 investment would prove much more beneficial coming from only a small investment.
To compute your rate of return for a period of one year, simply calculate the percentage of your monetary return in relation to your initial investment. Just like in the example above. This is called the Annual Rate of Return.
If you want to determine your rate of return for a period if less or more than a year, multiply or divide your monetary return to arrive at a comparable one-year return. This is what is called Annualized Rate of Return.
For a less than a year rate of return, say for example a 2% one-month rate of return would represent a 24% rate of return by simply multiplying 2% with 12 months. On the other hand, over a year computation of rate of return could be computed by dividing the sum of the monetary earnings by the product of the initial investment.
And the period of time it was accumulated, that would give you your Annualized Rate of Return.
By your GoodBuddy Richard La Compte
You may contact me through my Help Desk***Sorry Comments Are Temporarily Disabled!
My ArticlesThe Basics You Have To Know In Selling Annuities
Where To Sell Annuities Connection
What You Need To Know When Selling Annuity
Inherited Annuity: A Boon Or A Bane?
Sell My Annuity Payments
Sell Retirement Annuity For Lump Sum Payment
Reasons To Sell Structured Settlement Annuity
Should You Sell Annuity Payments?
Sell Annuity Settlement: The Basic Guide
Understanding Your Rate Of Return
The Best Ways To Sell Your Annuity
How To Easily Sell Your Annuity Payments
Sell Annuity Payment To Refinance Home Loans
Guide To Selling Annuity Payments
Formulas In Selling Your Annuities
Facts On Selling Annuities
Sell Tax Deferred Annuity
Client-Focused Selling: The Key To Selling Annuities
Steps In Selling My Annuities
Sell Annuity Comparison For Cash
Useful Facts About Annuity Selling
Sell Your Annuities Right
Is Selling Your Annuity Settlement The Ultimate Solution?