If your investment's principal and growth rate change within a single period, you can calculate your returns in a two different ways. Time-weighted investment returns calculate the average growth rate on the investment, considering only the rates and the duration for which each acts. Dollar-weighted returns, however, give greater importance to rates that act on higher principals. Dollar-weighted returns clearly state your actual returns but do not clearly describe the investment's performance independent of your deposits and withdrawals.
Step 1
Subtract the investment's value at the beginning of the period that you are analyzing from its value at the end of the period. For example, if an investment of $10,000 grows to $12,000, subtract $10,000 from $12,000 to get $2,000.
Step 2
Divide this difference with by the investment's value at the beginning of the period. Continuing the example, divide $2,000 by $10,000 to get 0.2.
Step 3
Multiply this ratio by 100 to convert it to a percentage. 0.2 multiplied by 100 gives a dollar-weighted return rate of 20 percent. This value is accurate no matter how long the growth took or how the growth rate varied over the course of this time.
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Ryan Menezes is a professional writer and blogger. He has a Bachelor of Science in journalism from Boston University and has written for the American Civil Liberties Union, the marketing firm InSegment and the project management service Assembla. He is also a member of Mensa and the American Parliamentary Debate Association.