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Calculating ROE

  • Post #1
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  • First Post: Oct 30, 2010 2:52am Oct 30, 2010 2:52am
  •  fr600
  • | Joined Feb 2010 | Status: Alive & Lost | 260 Posts
After searching a lot and finding no good answer, here I am.

I want to calculate ROE for the month of October, 2010. This is an example of flow of money in and out of my account.

Oct 1: Opening Balance = 370,000
Oct 12: Realized Gain = 7,000
Oct 18: Deposit = 320,000
Oct 23: Withdrawal = 50,000
Oct 29: Realized Gain = 1000
Oct 31: Closing Balance = 648,000

Oct 31: Unrealized Gain = 20,000

If there was no deposit or withdrawal, I could easily do a (total return/opening balance) but I'm not sure what I can do now to find out ROE.

Any help appreciated.
  • Post #2
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  • Last Post: Nov 3, 2010 7:17pm Nov 3, 2010 7:17pm
  •  Moody
  • | Joined Jan 2010 | Status: Member | 206 Posts
Return on equity is typically calculated as the net income you earn on average stockholders' equity. Academic definition, couldn't resist!

Calculate it as:

(final - initial) / initial

You started with $1000, ended with $1500, percent gain = 50%.

I'd add in withdrawls and subtract deposits (unless that money was used to generate trading profits)

In essence, what return did I gain using what amount of equity?
 
 
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