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.
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.
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.
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.
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.