How do I compute annual rate of return in Excel?

[vg]

I have two columns: date and value of an investment on that date.
I want to select a date and compute the rate of return on the investment for
the prior year leading up to the selected date. Is there a possible for this?

 

[Fred Smith]

You want XIRR. Just feed XIRR the dates and the cash flows, and it will
calculate the return for you. Remember, to calculate rate of return, all you
need are the cash flows (money in and money out). Intermediate values of the
investment are immaterial.

If you are trying to calculate the return on an existing investment, you
need to assume you sold it on the last day of the period. IE, enter the
date, and the value of the investment as a negative number.

If you need any more help, post back with an example of your data.

Regards,
Fred.

 

[joeu2004]

I have two columns: date and value of an investment on that date.
I want to select a date and compute the rate of return on the investment for
the prior year leading up to the selected date.  Is there a possible forthis?

Anything is possible; but it might be difficult. If I understand you
correctly, the difficulty might be finding the value of the investment
a year before the chosen date. The difficulty depends on the
regularity of the data.

Do you have daily, weekly, monthly, or quarterly data or something
like that? Or do you have values on irregular dates?

Suppose you have quarterly data starting in row 2, with A2 being the
date and B2 the value. Then in C6, the annual percentage growth is B6/
B2 - 1. (Format as Percentage). If you copy that formula down, it
will compute the annual percentage growth for each date.

If you have something different in mind, you might want to explain in
more detail.

 

[Fred Smith]

In calculating the return of an investment, the regularity of the data is
immaterial. The only thing that matters is cash flow. When you invest $1000
and a year later have $1100, you've made 10%. It doesn't matter what values
the investment had during the year.

Put the dates and the cash flows in two ranges then feed this to XIRR. It
will calculate the return.

Regards,
Fred.

I have two columns: date and value of an investment on that date.
I want to select a date and compute the rate of return on the investment
for
the prior year leading up to the selected date. Is there a possible for
this?

Anything is possible; but it might be difficult. If I understand you
correctly, the difficulty might be finding the value of the investment
a year before the chosen date. The difficulty depends on the
regularity of the data.

Do you have daily, weekly, monthly, or quarterly data or something
like that? Or do you have values on irregular dates?

Suppose you have quarterly data starting in row 2, with A2 being the
date and B2 the value. Then in C6, the annual percentage growth is B6/
B2 - 1. (Format as Percentage). If you copy that formula down, it
will compute the annual percentage growth for each date.

If you have something different in mind, you might want to explain in
more detail.

 

[joeu2004]

In calculating the return of an investment, the regularity of the data is
immaterial. The only thing that matters is cash flow. When you invest
$1000 and a year later have $1100, you've made 10%. It doesn't matter
what values the investment had during the year.

And if you follow my example more closely, you will see that I did not
include them.

The "regularity of the data" does not affect the result. But it might
affect the simplicity of a solution.

Put the dates and the cash flows in two ranges then feed this to XIRR.
It will calculate the return.

And if $1000 is in B2 and $1100 is in B6, B6/B2 - 1 calculates the
annual return. Much simpler. No need to copy data or change signs.

The real point of my first response was: the OP's requirements are
ambiguous. I wanted to present the OP with a choice -- a simpler
solution for the simplest problem. It is up to the OP to decide which
solution applies to his/her situation.

(I would consider XIRR only if there were multiple cash flows, and the
OP wants to take time-value into account. But mutual funds do not
when they compute total return rates.)