Calculating returns - how to calculate what investing can bring you.

Money is worth less and less. That is why you want to make it work. In the hope that it will become worth more, or at least remain stable. Profit on your money is also called positive return. But how do you achieve a return? And how exactly do you calculate your return?

In this article you will discover what return is, how you can easily calculate it and what you can do to achieve your own return.

What is profitability?

Return is how much an investment will bring you or cost you, expressed in percentages. Is the percentage positive? Then the returns are greater than the costs. Negative? Then your investment is now worth less than your deposit.

Good to know: risk and return often go hand in hand. A high-risk investment often has a higher potential return than a low-risk investment.

How to calculate return

To estimate whether an investment, such as buying a share, could be interesting, you can calculate the possible return. You often calculate the return over a certain period. Per month or per year, for example. To do this, you need two pieces of information:

- The (estimated) value of your investment at the beginning of the period
- The (estimated) value of your investment at the end of the period

Calculate annual returns

If you want to know what your annual return is, you can use the following example:

Amy had a value of €10,000 in investments at the beginning of 2022. She has studied the prices and estimates that by the end of 2022 the value of her portfolio will be €12,000. Amy estimates that her return this year will be 20%, she calculates her annual return by putting the data into the formula: ((12,000-10,000)/10,000)x 100%= 20%.

Calculate monthly return

Now you know how to calculate your annual return. But in some cases it is valuable to calculate your monthly return. The average monthly return is calculated as follows:

Amy expects an annual return of 20% on her investments. Amy estimates that her monthly return will be 1.53%. She calculates her monthly return by putting the data into the formula: (1+(12000 - 10000)/10000)^(1/12) - 1 = 1.53%.

Please note that there are different ways to calculate returns. We have now dealt with only one way of doing this.

3 different ways to get returns

Achieving profitability is a great goal. But doing it successfully often proves to be a challenge. In order to help you a step further, we have worked out three different ways for you.

Way 1: Saving

One way of achieving a return is by saving money. You do this by putting money in your savings account and letting it earn a return through the savings interest rate that your bank gives you. Unfortunately, in recent years savings yields have been low. This is due to the low savings interest rate. That is why it is better nowadays to look for other ways to put your money to work.

Way 2: Investing

A popular way of achieving returns is by investing your money. Investing is a form of investing whereby you tie up money in order for it to become more valuable. You can do this by investing in shares of companies, bonds or investment funds, for example.

Way 3: Real estate

A stable way to achieve returns is by investing in real estate. These are for example houses, business premises and factories. However, this way is, due to the high investment, out of reach for most Dutch people.

Do you want to make worry-free money work for you?

Do you want to achieve possible returns, but do not have the time or inclination to study investing? Vive puts your money to work with a customised investment plan and executes it for you. In this way you build up equity, without having to do anything.

Watch out! Investing entails risks.