# Rate of return

I have been saving money since 2009. The following table lists the amount of money I have saved in a particular fiscal year.

 Year Savings (in CHF) 2009 5,000 2010 20,000 2011 25,000 2012 25,000

Calculating the rate of return in such cases has complications. I have then decided to simplify things. I will assume that the money saved in a particular fiscal year is only invested at the beginning of the next year. This way on Jan 1, 2012, the 5,000 saved in 2009 had 3 years to appreciate while the 25,000 in 2011 had only one. If we assume the rate of return to be x then on Jan 1, 2012 my account will have

5*(1+x)^3+20*(1+x)^2+25*(1+x)

Looking at the portfolio I found that as of today (Mar 21, 2013) it is worth 6,000 more than the total money I have put in.

Solving for x gives me a compounded rate of return i.e., x = 7.3%.

Nothing great and much below my goal of 20% rate of return. But given that I made some major mistakes in 2009, 2010 and 2011 … I am happy that I have been able to beat the savings account in Switzerland (1.5% at most) by a wide margin.

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