Help me figure rate of return

[ilovedolphins]

I don't know how to figure out my rate of return on my Prosper account.  I started it 4 years ago.  I deposited $4900 and withdrew $6582.  How do I figure what rate of return I received for 4 years?

[CCL]

Found this:

www.moneychimp.com/calculator/discount_rate_calculator.htm

[ilovedolphins]

It figures out at 7.66%.

[CCL]

I believe that's per year. I also took the $6582-$4900 that gives you $1682 total profit. Divide that by your original $4900 and it equals .343 or 34.3% total return. Someone else may have a better way of calculating, but that's how I would do it.

[ilovedolphins]

I can't decide if this is another way I want to use my money for.  I have all my money back out of it but can't decide if I want to put more money in or just put it in the stock market.

[CCL]

Hmmm... That's not a bad rate of return. Historically, though, S&P 500 should do better. I've never counted on getting 11% per year like some people do.

You should consider your timeline, what you plan to use the money for, what percentage of your total net worth you are looking at, and how much volatility you can tolerate.

[Regis]

For annualized rate of return, the formula would be:

AR = ((W) / D) ^ (1 / n)) - 1

where AR is annualized return, W is withdrawal amount, D is the deposit amount and n is the number of years it was in the account.

So for yours, it would be ((6582/4900)^0.25)-1=0.0766 or 7.66%. 

[phil5185]

politicalcalculations.blogspot.com/2006/12/sp-500-at-your-fingertips.html#.XW04SHtlCUk

Here is an SP500 history site. For the most recent 4 years, the SP500 rate was 11.57%//yr. You can select a few 30-year blocks of time, the typical 30-yr average is about 11%/yr. (30 years is long enough to provide statistical averaging, almost any recession that is averaged into 30 yrs will smooth out in that period.)

Personally, I put all of my equity investing into the SP500 Index.