Investment Return Calculator

Calculate your investment returns to understand performance. This calculator shows total return, return percentage, and annualized return (CAGR) - essential metrics for evaluating investment performance and comparing different investments.

Understanding Investment Returns

Total Return

The absolute dollar amount gained or lost: Final Value - Initial Investment

Example: Invested $10,000, now worth $15,000 = $5,000 total return

Return Percentage

The percentage gain or loss: (Total Return / Initial Investment) × 100

Example: $5,000 return on $10,000 = 50% return

Annualized Return (CAGR)

The average annual return rate: (Final Value / Initial Value)^(1/Years) - 1

Example: 50% return over 5 years = 8.45% annualized return

CAGR accounts for compounding and makes returns comparable across time periods.

CAGR Formula

CAGR = (Final Value / Initial Value)^(1/Number of Years) - 1

This formula shows what constant annual return would produce the same final value.

Example Calculations

Example 1: Stock Investment

Initial: $10,000

Final: $15,000

Years: 5

Total Return: $5,000 (50%)

CAGR: 8.45% per year

Example 2: Real Estate

Initial: $200,000

Final: $300,000

Years: 10

Total Return: $100,000 (50%)

CAGR: 4.14% per year

Why Use CAGR?

Comparability

CAGR allows you to compare investments with different time periods. A 50% return over 5 years (8.45% CAGR) is better than 50% over 10 years (4.14% CAGR).

Compounding Effect

CAGR accounts for compounding - returns earning returns. Shows the power of compound growth.

Standardized Metric

Industry standard for comparing investment performance. Used by mutual funds, ETFs, and financial advisors.

Total Return vs. Annualized Return

Total Return

Shows overall performance for the entire period. Useful for: seeing total gain/loss, calculating taxes, understanding absolute performance.

Annualized Return (CAGR)

Shows average annual performance. Useful for: comparing different investments, projecting future growth, understanding year-over-year performance.

Common Investment Returns

Stocks (S&P 500)

Historical average: ~10% annual return (long-term)

Volatile: Can be -30% one year, +30% the next

Bonds

Historical average: ~5-6% annual return

Lower risk, more stable returns

Real Estate

Historical average: ~4-6% annual appreciation

Plus rental income if investment property

Savings Accounts

Current: 0.5-5% annual return (varies by rates)

Low risk, low return

Factors Affecting Returns

Asset type: Stocks vs. bonds vs. real estate
Time period: Longer periods smooth out volatility
Market conditions: Bull vs. bear markets
Fees: Management fees, trading costs reduce returns
Taxes: Capital gains taxes reduce net returns
Inflation: Real returns = nominal returns - inflation

Real vs. Nominal Returns

Nominal Return

The return percentage you see (e.g., 8% return). Doesn't account for inflation.

Real Return

Return adjusted for inflation: Nominal Return - Inflation Rate

Example: 8% return - 3% inflation = 5% real return

Real return shows actual purchasing power gained.

Comparing Investments

Same Time Period

Compare total return or CAGR directly. Higher is better.

Different Time Periods

Always use CAGR for comparison. Total return percentages can be misleading.

Example: 50% over 5 years (8.45% CAGR) vs. 50% over 10 years (4.14% CAGR)

Investment Performance Benchmarks

S&P 500: ~10% annual return (long-term average)
Total Stock Market: ~10% annual return
Bonds (Aggregate): ~5-6% annual return
60/40 Portfolio: ~8-9% annual return
Inflation: ~3% annually (target)

Tips for Evaluating Returns

Use CAGR: For comparing investments over different periods
Consider fees: Net returns matter more than gross returns
Account for taxes: After-tax returns are what you actually keep
Compare to benchmarks: See if you're beating the market
Long-term view: Short-term returns can be misleading
Risk-adjusted: Higher returns often come with higher risk

Common Mistakes

Comparing total returns: Over different time periods without annualizing
Ignoring fees: Not accounting for management fees and expenses
Forgetting taxes: Pre-tax returns look better than after-tax
Short-term focus: One-year returns don't predict long-term performance
Not considering risk: Higher returns may come with higher volatility

Investment Tip: When evaluating investment returns, always use CAGR (annualized return) to compare investments over different time periods. Also remember that past performance doesn't guarantee future results. Focus on long-term returns (5-10+ years) rather than short-term fluctuations. And don't forget to account for fees and taxes - they significantly impact your actual returns!

Investment Return Calculator