Investments and Tracking Your Return on Investments

Every investor should know how well their investments are performing. One way to evaluate the performance is to calculate on investment (ROI) and compare it to a market index your return. The problem is that most financial institutions offer no personal return (ROI) of their statements and doing the calculations yourself is not easy, especially if you have contributions or withdrawals for a period.

Why is it important to track your ROI? Let's use an analogy. You know how much you make. You probably also know if your salary is comparable to people with similar features. Knowing these facts, ie a reference point to compare with others your own salary, you can determine whether a reasonable compensation. Likewise, it is equally important for you to know not only what are worth your investment, but also back they have earned and how they compare with a reference such as a market index (the Dow, S & P 500, etc these returns .)

What's the ROI? In its simplest form, the return earned on an investment. For example, if you have $ 1,000 in a bank account and you earned $ 50 in interest at the end of the year, your ROI would be 5%. The calculation is more complex when:

You have several portfolios in several financial institutions and you want to calculate the individual performances. Portfolio or a return of your portfolio on a combined basis
You have contributions or withdrawals made during the accounting period, which must then be weighed for accurate return calculations.
You can not access index have rates of returns for comparison purposes.

How do you determine how well your investments perform? You need to consider three factors as follows:
Invested amount
If you invested $ 100,000 earned $ 1,000, your ROI is 1%.
But if you invested $ 10,000 and still earned $ 1,000, your ROI is 10%.

Period
If you invested $ 100,000 and earned $ 1,000 after 5 years, your ROI is 0.2%.
But if you invested $ 100,000 earned $ 1,000 after one year, your ROI is 10%.

Similar Return
If your investments earned 10%, but a comparable market index such as the S & P 500 return of 18% that you do not do as well as the market in general.
Even if your investments earned only 4%, but the market yield of 2%, you did well.
Knowing how well relative to the market have performed your investments over a long period of time is an important step in managing your investments in an intelligent way. Empowered with this information you can determine whether you need to make changes and maximize your return relative to the risk you are comfortable with.

Fauzi Zamir is a chartered accountant and founder of Solutionera Inc., a web site that allows investors to easily track, calculate and compare doing their ROI against market indices without the complicated mathematical calculations developed. You can visit the site at: