How did your investments perform last year? It’s an important question, and at first glance, it seems like it should be easy to answer.

However, when you consider any contributions or withdrawals you made and whether you received any interest or dividend checks, the math can start to look much more complex. And, while some brokers do a good job with this analysis, what if you have money at more than one broker?

Not to worry. If you know just four facts about your investments — the starting balance, how much you contributed, how much you withdrew (including interest and dividends you received), and the ending balance — this article will show you a relatively simple way to calculate your returns.

Some brokers make it easier than others to find the facts required for the calculation, but even if it takes a phone call, you should be able to find the numbers you need.

The returns we’ll help you calculate won’t be perfectly precise, as we’ll give up a little accuracy in return for simplicity, but they’ll be close enough for most investors’ needs. (Our process treats all deposits and withdrawals as though they took place at mid-year. This method will usually get you within one percent of the account's actual return.)

In Example #1 below, steps 1 through 6 make adjustments to the ending and beginning balances in a college savings account so as to take into account a \$3,200 withdrawal and contributions of \$400 per month. In step 7, the adjusted beginning balance is subtracted from the adjusted ending balance in order to measure how much the account has gained or lost in dollar terms. Steps 8 through 10 compute an approximate average monthly balance, and step 11 gives you the gain or loss in percentage terms — in this case, a gain of 16.6%.

Example #2 shows a couple’s retirement account, which is being tapped for monthly income. The ending balance is lower than the beginning balance, but this doesn’t necessarily mean the account lost money on its investments. After neutralizing the effects of \$600 monthly withdrawals, the account actually generated a positive return of 7.4% for the year.

Similarly, just because an account grows in value over the year doesn’t mean its investments were profitable. Example #3 shows an IRA that grew from \$26,188 to \$29,456. However, after factoring in a \$5,000 deposit, the account actually lost 6.2% on its investments.

When comparing your investment returns with those of a benchmark such as the Wilshire 5000, remember that benchmarks assume the amount invested is unchanged throughout the year. If you’re dollar-cost-averaging (investing the same amount every month), it’s unlikely your results will be the same. Because you weren’t fully invested for the entire period, you’ll tend to do better than the averages in a down year and worse in an up year.

You can perform this calculation for each individual account you own (401(k), IRA, taxable account) or you can run it as a total across all accounts.

If you want a more accurate measure of your investment returns, you could learn how to use the IRR and XIRR functions in Microsoft Excel or another spreadsheet program, or you can buy a financial software package such as Quicken Premier. Either way, the process can still be time-consuming, and the additional accuracy may not be worth the additional cost or effort. Using the method shown in this article should meet the needs of most investors.