When to use this formula
Use this formula when your inputs match the variables and units shown below. It is most useful for checking a calculator result, recreating the calculation in a spreadsheet or understanding which input has the biggest effect.
Quick use
Use total-return formulas for performance comparison and rebalancing formulas for allocation control.
Formula
Total return = (ending value - starting value + income) / starting value; expense cost ≈ balance x expense ratio; target holding value = portfolio value x target weight; rebalance trade = target holding value - current holding value.
Variables
Starting value, ending value, income, expense ratio, portfolio value and target weights must use the same date range and currency.
Method notes
- Use money-weighted returns when cash-flow timing matters.
- Use target weights that add to 100% before rebalancing.
- Expense ratios compound over time and are not one-time fees.
Example
If a fund rises from 100 to 106 and pays 2 in distributions, total return is 8% before taxes and fees.
Assumptions and limitations
Return formulas can be before or after tax, before or after fees, time-weighted or money-weighted. Currency effects and reinvestment assumptions should be stated.
When the formula is not enough
- If the result depends on live prices, rates or official thresholds, check the latest value from the named source before relying on it.
- If the topic is medical, tax, legal, lending or safety related, use the result as a learning aid and check primary guidance before acting.
- If units or time periods differ, convert them before comparing results.
- If rounding affects the decision, keep extra precision until the final step.
Common mistakes
- Comparing price return to total return.
- Ignoring fund fees or currency changes.
- Rebalancing without considering taxes and transaction costs.
FAQ
Why look at the formula instead of only the answer?
The formula shows which inputs actually drive the result. That makes it easier to spot a wrong unit, compare two scenarios or explain the answer to someone else.
Can different calculators use different formulas for the same topic?
Yes. Some topics have multiple accepted methods or simplified variants. When that matters, the calculator should say which method it uses and what is excluded.
Are formula pages updated?
Stable math formulas need occasional review. Formulas that depend on changing rules, prices or thresholds need a dated source before the page can make stronger claims.