How to Calculate Initial Timing

Use initial timing to calculate long-term investments.

Whether you are planning your retirement, education costs or any other investment, you must have a clear initial timing. The timing is used in investment calculations by calculating how many months or years until the return is expected. This is important in calculations of cash flow and return on investment (ROI), as well as other time-based metrics.

Instructions

1. Examine the investment that you are making. Whether it is ongoing or upfront in one lump sum, the initial timing will be the same.

2. Use the first day of your investment as your initial timing. Some people make the mistake of using the first day of the calendar year or the fiscal year, but this will alter your calculations, so be as precise as possible.

3. Consider using the first day of the month or the quarter as your initial timing to calculate long-term investments of multiple years. A long-term return on investment over five or 10 years will be negligibly effected by an initial timing that differs by several weeks from the true date of the first investment.

References

• Fat Pitch Financials; How to Calculate Your Return on Investment; Sept. 2006
• Investopedia: Return on Investment