these are probably not a trading question but they are related to it.
I am trying to track my return on investment and I have 3 questions
1 - Monthly return (gain). The month of June I started with a capital of 255 euros, I made 56 euros trading,
I calculate my gain with the following formula: Profit/Initial capital, which gives me 22%
Is this correct?
2 - Yearly return (gain). The month of July I started with a capital of 367 euros (which is the end of the previous month + 50 euros extra deposit)
I calculate the monthly return same as above, which currently stands at 7%,
What is the formula to calculate my yearly return? If I did not add the extra 50 euros, I would simply sum 22% plus 7%,
but the extra 50 euros I deposited confuses me, I could just remove the 50 euros from the formula, but the 7% was calculated and made with the use of the extra 50 euros.
ROI is calculated as the gain as a percentage of the total capital available for investment. You must include all capital available, regardless of where it came from.
Do not just add percentages - a percentage is a mini-formula and the important part in that formula is not the number but the total.
I know you said finance was not your strongest point but there are 12 months in a year and you’ve only done 2. So maybe wait till you complete the year to work out your yearly return. Unless you’re trying to estimate what you will make in which case I’ll remind you past returns are not indicative of future performance.
Also you cant add a percentage to a percentage. You have to take your whole investment of what you deposited and then see how much you’ve made and work out the percentage.
Basically you need to divide your monthly return by twelve if you already know your yearly one, just like in case with deposits. With case of monthly retun if you really don’t know anything besides some monthly it’s hard to predict I hope you really see why honestly.