Calculating returns - this is how you calculate what investing can yield you.

Money is constantly losing value. That is why you want to put it to work, hoping it will increase in value, 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 return? In this article, you will discover what return is, how to easily calculate it, and what you can do to achieve a return yourself.

What is return?

Return is how much an investment yields or costs you, expressed as a percentage. Is the percentage positive? Then the proceeds are greater than the costs. In the negative? Then your investment is now worth less than your initial 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.

This is how you calculate return

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

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

Calculating Annual Return

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 stock prices and estimates that the value of her portfolio will be €12,000 at the end of 2022. Amy estimates that her return this year will be 20%, she calculates her annual return by placing the data into the formula: ((12,000-10,000)/10,000)x 100%= 20%. ‍‍

Calculating Monthly Return

You now know how to calculate the 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 placing the data into the formula: (1+(12000 - 10000)/10000)^(1/12) - 1 = 1.53%.

Please note: there are different ways to calculate return. We have only covered one way you can do this.

3 different ways to achieve return

Achieving a return is a great goal. But doing this successfully often proves to be a challenge. To help you take a step further, we have outlined three different ways for you.

Method 1: Saving

One way to achieve a return is by saving money. You do this by putting money into your savings account and letting it yield a return through the interest rate your bank gives you. Unfortunately, saving has yielded little in recent years. This is due to the low savings interest rate. Therefore, it is better to look for other ways to put your money to work today.

Method 2: Investing

A popular way to achieve a return is by investing your money. Investing is a form of investment where you commit money to make it increase in value. You can do this by investing in company shares, bonds, or investment funds, for example.

Method 3: Real Estate

A stable way to achieve a return is by investing in real estate. These are, for example, homes, commercial buildings, and factories. However, due to the high initial investment, this method is out of reach for most Dutch people.

Do you want your money to work for you without worry?

Do you want to achieve a potential return but lack the time or inclination to delve into investing? Vive puts your money to work with a customised investment plan and executes it for you. This way, you build wealth without having to do anything.

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Please note! Investing involves risks.