1. What is Bad Rate of Return?

The Bad Rate of Return (Bad ROR) measures the percentage return that falls below a specified benchmark. It helps identify underperforming investments or portfolios by focusing only on returns that don't meet expectations.

2. How Does the Calculator Work?

The calculator uses the Bad ROR formula:

Where:

• \( ROR \) — Actual Rate of Return (%)
• \( Benchmark \) — Minimum acceptable return (%)

Explanation: The formula captures only those returns that fall below the benchmark, helping investors identify underperformance.

3. Importance of Bad ROR Calculation

Details: Calculating Bad ROR helps investors and fund managers identify investments that consistently underperform benchmarks, enabling better portfolio management and risk assessment.

4. Using the Calculator

Tips: Enter your actual rate of return and benchmark rate as percentages. The calculator will show the Bad ROR (which will be either your ROR if below benchmark, or 0 if it meets or exceeds the benchmark).

5. Frequently Asked Questions (FAQ)

Q1: Why focus on bad returns instead of average returns?
A: Bad ROR helps identify downside risk and potential losses, which is often more important than average returns for risk-averse investors.

Q2: What's a typical benchmark rate?
A: Benchmarks vary by investment type - it might be inflation rate, risk-free rate, or a market index return depending on context.

Q3: How is this different from Sharpe ratio?
A: While Sharpe ratio considers both risk and return, Bad ROR specifically measures the magnitude of underperformance relative to a benchmark.

Q4: Can Bad ROR be negative?
A: Yes, if your actual return is negative and below your benchmark, Bad ROR will show that negative percentage.

Q5: Should I use this for all my investments?
A: Bad ROR is most useful for evaluating investments where downside protection is important, not necessarily for all portfolio components.