5 Easy Ways To Calculate Monthly Returns In Excel

Calculating monthly returns in Excel is a crucial task for investors, financial analysts, and business professionals. It helps in understanding the performance of investments, making informed decisions, and predicting future trends. In this article, we will explore five easy ways to calculate monthly returns in Excel, using various formulas and techniques.

Understanding Monthly Returns

Before diving into the calculation methods, let's understand what monthly returns represent. Monthly returns are the percentage change in the value of an investment over a month. It's a measure of the investment's performance, taking into account the income earned, capital gains, and losses.

Method 1: Using the Simple Return Formula

The simplest way to calculate monthly returns is by using the simple return formula:

Monthly Return = (Ending Value - Beginning Value) / Beginning Value

This formula can be applied to a single investment or a portfolio of investments.

Example:

Suppose you invested $1,000 in a stock at the beginning of the month, and it's now worth $1,100. To calculate the monthly return, you would use the formula:

Monthly Return = (1,100 - 1,000) / 1,000 = 0.10 or 10%

Method 2: Using the Excel XIRR Function

The XIRR function in Excel calculates the internal rate of return for a series of cash flows. It can be used to calculate monthly returns by assuming that the investment is made at the beginning of the month and the return is realized at the end of the month.

Example:

Suppose you invested $1,000 in a stock at the beginning of the month, and it's now worth $1,100. To calculate the monthly return using the XIRR function, you would use the following formula:

XIRR(values, dates)

Where values is the range of values representing the investment, and dates is the range of dates representing the beginning and end of the month.

Method 3: Using the Excel RATE Function

The RATE function in Excel calculates the interest rate for a series of cash flows. It can be used to calculate monthly returns by assuming that the investment is made at the beginning of the month and the return is realized at the end of the month.

Example:

Suppose you invested $1,000 in a stock at the beginning of the month, and it's now worth $1,100. To calculate the monthly return using the RATE function, you would use the following formula:

RATE(nper, pmt, pv, fv)

Where nper is the number of periods, pmt is the payment made, pv is the present value, and fv is the future value.

Method 4: Using the Excel Power BI

Power BI is a business analytics service by Microsoft that allows users to create interactive visualizations and business intelligence reports. It can be used to calculate monthly returns by creating a data model and using DAX formulas.

Example:

Suppose you have a table with the following columns: Date, Investment, and Value. You can create a measure to calculate the monthly return using the following DAX formula:

Monthly Return = (Value - Investment) / Investment

This measure can then be used to create a report that displays the monthly returns for each investment.

Method 5: Using the Excel Array Formula

The array formula in Excel allows users to perform calculations on arrays of data. It can be used to calculate monthly returns by creating an array of values representing the investment and using the formula:

Monthly Return = (MAX(array) - MIN(array)) / MIN(array)

Example:

Suppose you have an array of values representing the investment: {1000, 1100, 1200, 1300}. To calculate the monthly return using the array formula, you would use the following formula:

Monthly Return = (MAX(array) - MIN(array)) / MIN(array)

This formula can be applied to a single investment or a portfolio of investments.

Gallery of Monthly Returns Calculations

Monthly Returns Calculation Gallery

Takeaways

Calculating monthly returns in Excel is a crucial task that can be accomplished using various formulas and techniques. By using the simple return formula, XIRR function, RATE function, Power BI, or array formula, users can calculate the monthly returns for their investments and make informed decisions.

What's Next?

We hope this article has helped you understand how to calculate monthly returns in Excel. If you have any questions or need further assistance, please don't hesitate to ask. Share this article with your friends and colleagues who may benefit from it.