Systematic Investing Group

[Conrad]

Hi Late Starter,

Can someone tell me how to figure annualized rate of return on monthly investments like those in synchrovest.

Example: $100 a month invested for 20 years.

Total investment: $24000

Total value after 20 years: $54000

Gain: 125%

The annualized Simple Return On Investment=AROI can be calculated for any Period. Normally after that period, the next period begins with the Gain of the previous year added to the capital. . .then after 20 years it is Compounded ROI. The way you are asking it however looks to me that you want the 20 year period without annual compounding. This is:

SROI = {54000 -24000)/(24000/2)*100/20 = 12,5 % Annualized SROI

IF the 24000 investment would include de interest you have earned then the 12,5 % AROI would in fact be a Compounded Average AROI. . .=CAROI. So it all depends how you define Gain and Investment.

*The direct Gain = 30000
*On the Average your invested capital is 12000. . . .This is the amount you would have invested in 10 years, so the average investment over the 20 years is 12000(approximately as this is the simplest formula).
* In 10 years you gain would be 15000 on the average.

Of course, it is possible to be use a more refined compounded average annual ROI, if the payments per month are not always 100, and if the interest varies from year to year (which it always does).

In your example however you have constant monthly payment plan, so the formula I gave you is really the Time Averaged ROI. . . I call that ROTAI= Return On Time Averaged Investment.

In my Vortex AIM I use the ROTAI as a standard Yield Percentage for he Investment, and it is calculated at any time you open the program and works with any payment structure with variable amounts and variable periods. It even calculates-in the expenses you have made for the Investment . . .an Expense in an Investment.

If you have more question on Compounded Interest calculations just ask me. I can be found on:

http://investorshub.advfn.com/boards/board.aspx?board_id=1341

Regards,
Conrad