When comparing mutual funds, exchange-traded funds or any other type of investment, one of the most important measures to consider is its pretax rate of return. The pretax rate of return is the percentage of money that was either lost or gained during a particular time period, without considering the impact of taxes. Most funds will offer this type of information for you, but it is always good to know how to do this type of calculation yourself so that you are able to double-check their figures.
Determine what time period you would like to calculate the rate of return for. Common intervals used for this type of metric are monthly, quarterly and yearly.
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Find the price of the fund on the first time of the time period and the price of it on the last day of the chosen time period. This information can be found online by pulling up a stock quote and looking at its historical prices.
Calculate the fund's pretax rate of return. To do this, subtract the price of the fund at the end of the chosen time period from the price of the fund on the start date of the period. Divide the result by the price of the fund on the period's start date and then multiply by 100. This will be the fund's pretax rate of return.
If a fund was priced at $200 at the start of the selected interval and ended with a price of $300, the fund's pretax rate of return would be 50 percent, as shown in the following equation:
(($300 - $200) / $200) x 100