Return on Investment (ROI): How to Calculate

How to Calculate a Monthly Return on Investment

By Motley Fool Staff – Updated Apr 29, 2025 at 11:54 PM

Key Points

Calculate monthly returns by adjusting your portfolio's start/end balance with net deposits or withdrawals.
Compare monthly returns to benchmarks like the Dow to assess your investment strategy.
Avoid basing long-term investment decisions on a single month's performance.

Long-term investors know that it's important to keep a perspective on the fluctuations of the financial markets. Nevertheless, looking at monthly returns on investment can give you important information about whether you're doing better or worse than the overall market, and if you're systematically underperforming, you can take steps to adopt better investing strategies.

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Person in front of blackboard with investing-related pictures and words drawn on it. — Image source: Getty Images.

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Note that most of the time, monthly returns will be relatively small. That's because most people are used to seeing annual returns rather than monthly ones. If you want to know the corresponding annual return, then there are two things you can do. The simple but less accurate way is to multiply the monthly return by 12. The technically correct way is to add 1 to the monthly return, raise the result to the 12th power, and then subtract 1 back out. This will result in a slightly larger number than the simple method.

Annualized Return = ((1 + Monthly Return) ^ 12) – 1

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