Investment Return Calculator

ROI and why it is only half the answer

Return on investment is the simplest useful measure: (proceeds + income − costs) ÷ cost basis, expressed as a percentage. It tells you how efficiently money turned into more money, which is why it works for comparing wildly different opportunities.

The weakness is that ROI ignores time. A 40% return earned over eight years is not better than a 30% return earned over two — it is considerably worse. Any comparison between two investments held for different periods has to be annualized before it means anything.

That is what the CAGR figure here solves. It smooths your actual return into the single steady yearly rate that would have produced the same ending value.

How CAGR is calculated

CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1. Because it compounds, it always sits below the simple average of yearly returns, sometimes dramatically so.

A portfolio that gains 50% then loses 40% has an average return of +5%, but actually lost money: the CAGR is about −5%. Variance drags compound returns down, which is the mathematical reason volatility matters even for long-term investors.

When you add money over time — monthly purchases, for example — honest measurement gets harder. Money invested later has had less time to grow, so dividing total profit by total contributions understates performance. This calculator separates your starting amount from later additions so you can at least see the pieces clearly.

Income, fees and total return

Price appreciation alone ignores a large share of actual returns, especially for dividend stocks and real estate. Total return includes every dollar received along the way, assuming it was reinvested.

Fees compound against you exactly like returns compound for you. A 1% annual fee on a portfolio compounding at 7% costs roughly $200,000 over 30 years on a $250,000 starting balance. Always enter your real costs.

Benchmarking honestly

Comparing your return to an index is the only way to know whether your decisions added value. Use these rough historical anchors:

• Broad US stock market: roughly 7% to 10% nominal per year over very long periods.
• Long-term investment-grade bonds: roughly 3% to 5% nominal.
• Cash and short-term Treasuries: close to the policy rate, often 2% to 5%.
• Rental real estate: highly local — leverage and appreciation assumptions dominate the result.