Whats the proper way to calculate your return on an investment, and what is a good return?

Since 10/2002, I've invested $3993.00 in a 457(b) plan and had a gain of $1525.01 through 03/31/07. Is this good?

Have you added any money along the way or was it a one time investment?

As long as it was a one time investment, the return is 1525.01/3993.00 = 38% cumulative.

To calculate it as an average annual rate you need to know how many years are represented between 10/2002 and 3/31/2007. I used 10/31/2002 as my start date and got 4.42 years. So the calculation is (1.38^(1/4.42))-1 = 7.57% each year, on average.

So...not a spectacular return, but better than you would have gotten in a CD or money market account.

To calculate your return the math expression would be....

((3993+1525.01)/3993) ^ (1/4.5) -1 (I'm using 4.5 years as an approximation). Just looking at the numbers, without doing the calculation, it looks very good.... but at WHAT risk?

1525 / 3993=38% gain since 10/02

For the same period (10/01/02 - 04/30/07)
the S&P 500 Dividend-adjusted gained 88%

Assuming that you were invested in equities (stocks or stock funds) that's a lousy return. However, if you were invested in bonds or a CD, that's a terrific investment.

Point is, you can't assess the quality of a return without also evaluating the risk.

i made 18% in april with limited risk

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