What Your Return Is When You Invest in Installments

You open your broker's app and see: you have paid in €3,600 in small contributions, and the account shows €4,200. A gain of €600 — but what is your annual return? You are tempted to divide the gain by what you put in, then by the years, and declare some number. But it will be misleadingly low, and here you will see why.

The simple formula (end − start) / start does a fine job when you invest a single sum all at once. But when you add money every month, it stays silent about one key thing: your later contributions had far less time to grow. To find your real return, you need a view that weights each euro by the time it spent invested.

The naive reading

Let us calculate it by the textbook. You pay in €100 a month for 3 years — that is 36 contributions, or €3,600 invested in total. Today the account shows €4,200, that is a gain of €600.

Total return: 600 / 3,600 = 16.7%. So far — correct. It is tempting to divide that by 3 years and declare ≈ 5.6% a year. That is wrong — and not by a little.

Why it is wrong

The catch is hidden in the word "invested." Not every one of those €3,600 sat in the market for 3 years. Your last €100 contribution was invested for only 1 month before you looked at the account. The first — a full 36 months. Each one in between — somewhere between the two.

On average, your money was invested for roughly half the period — about 1.5 years, not the full 3. Every euro has its own compounding clock: what went in early works for a long time; what went in yesterday has barely started. This is exactly the mechanism we cover in compound interest.

The consequence: the real rate is double

Here is why the naive number underestimates so badly. If your money worked on average only half the time but still brought in €600, then the rate at which it grows must be about double the naive 5.6% — around 11% a year in this example.

Do not fixate on the exact figure. What matters is the method: "about 11%" here is a guide that shows how misleadingly low the naive "5.6%" was. The real rate depends on the exact timing of each contribution — which is why we emphasize the approach, not the specific number.

What this is called: money-weighted return

The number you are looking for is called the money-weighted return — weighted by both the money and the time it was invested. It is the only annual rate that — applied to each of your contributions over the time it was actually invested — reproduces your final balance.

With a single lump-sum investment this subtlety disappears: there all the money starts on the same day, so the simple annualized return (CAGR) does the job. We explain the difference between the two cases in ROI and annualized return.

The practical trick: back out your own rate

The good news is that you do not need a master's in finance — you need a calculator that models each contribution separately.

Open the regular-investing (DCA) calculator and set: a €100 contribution, a period of 3 years. Then move the annual rate up and down until the projected final sum matches your real balance of €4,200. The rate at which the numbers line up is approximately your annual return.

For contrast, also try the ROI calculator: if you enter the totals there — €3,600 invested, €4,200 at the end, 3 years — it treats them as if the whole sum were invested all at once and therefore underestimates your real annual rate. Compare the two results and the difference between the naive and the money-weighted reading becomes tangible.

The two readings side by side

The same numbers — €3,600 paid in, €4,200 at the end — but two fundamentally different answers:

Reading	Annual return	Why
Naive (÷ years)	≈ 5.6%	Assumes all the money was invested for 3 years
Money-weighted (real)	≈ 11%	Accounts for money being invested ~1.5 years on average

The takeaway

With regular contributions, never judge your return by the formula "total gain ÷ years." It ignores the most important thing — that your money goes in piece by piece and each piece has a different amount of time to work. Use a tool that models each contribution's own clock, and you will see the true picture — usually considerably better than the naive one.

What this does NOT mean

It does not mean that regular investing is better or worse — it means it is measured differently from a lump sum.
It is not a recommendation. Selurio is an educational platform, not a financial adviser.
The numbers are a guide. Your real return depends on the timing of contributions, fees, and taxes.

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