How to Calculate Monthly Active Returns
Over time, you can measure your investment performance by the the amount it goes up or down, as well as a percentage of the original investment. These figures, however useful, do not tell you how well your investment performs compared to any benchmark. The active return measures your rate of return against a benchmark, such as a market index or set rate of return. A negative active rate does not mean you lost money, just that your investment did not do as well as the benchmark.
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Subtract your account value at the start of the month from the value at the end of the month to find your gain or loss. For example, if your portfolio started at $50,000 and increased to $50,400 by the end of the month, subtract $50,000 from $50,400 to get a gain of $400.
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Divide the gain or loss by the portfolio value at the start of the month to find the monthly rate of return. In this example, divide $400 by $50,000 to get 0.008.
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Multiply the monthly rate of return by 100 to convert it to a percentage. In this example, multiply 0.008 by 100 to find your monthly return equals 0.8 percent.
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Look up the benchmark rate from which you calculate the active return. For example, if you use the Dow Jones Industrial Average as the benchmark and that month it increased by 0.5 percent, you would use 0.5 percent as your benchmark.
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Subtract the benchmark from your percent return to find the active return. Completing this example, subtract 0.5 from 0.8 to find your monthly active return equals 0.3 percent.
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