I invest in multiple streams - equities, mutual funds, bank deposits etc. Depending on the asset class, my rate of return is different, naturally. Some asset classes generate higher ROI (with higher risk) while others generate lower (with lower risk).
My primary objective of investing is to grow my money; otherwise I would have kept it in my home (assuming my home is safe - kidding).
At some point, I want to calculate how much my money is grown. What I learned from this forum and the internet is that - there are two insects those eat money:
- Tax (include any kind of tax and fees may be)
So, if I want to calculate how much my money is grown, I think (I am not sure) I should subtract these two factors from returns.
My ROI is 10%. Inflation is 5%. Taxes I have to pay when my investment is cashed are 3%.
Money Grown = ROI - (Inflation + Taxes); Money Grown = 10 - (5 + 3); Money Grown = 2;
So apart from what ROI I get, my money only grown by 2%.
Is my understanding correct?
Are there any other factors I should consider while calculating actual returns?
Is there any established formula to calculate actual returns?