Investment Return Calculator
Calculate potential returns on your investment portfolio.
Investment Details
Investment Results
Future Value
$126,509
Total Invested
$75,000
Total Return
$51,509
Return on Investment (ROI)
68.7%
What Is Investment Return?
Investment return measures the profit or loss on an investment relative to its cost, expressed as a percentage. Two core metrics matter: ROI (simple total return) and CAGR (Compound Annual Growth Rate, which accounts for compounding over multiple periods).
ROI = (Final Value - Cost) / Cost × 100. Simple but ignores the time dimension.
CAGR = (Final Value / Cost)^(1/Years) - 1. The average annual growth rate assuming compounding.
ROI vs CAGR: Why CAGR Is More Useful
A $10,000 investment that grows to $15,000 over 5 years has an ROI of 50%. But what was the average annual growth rate?
CAGR = ($15,000 / $10,000)^(1/5) - 1 = 8.4%
The same 50% total return could be achieved in 2 years (CAGR = 22.5%) or 10 years (CAGR = 4.1%). CAGR lets you compare investments fairly regardless of timeframe.
Real Investment Return Benchmarks
| Asset Class | Historical Annual Return | Risk Level |
|---|---|---|
| S&P 500 (US stocks) | ~10% nominal / ~7% inflation-adjusted | High |
| Total world stocks | ~8-9% nominal | High |
| US bonds | ~4-5% nominal | Low-Medium |
| High-yield savings | 4.5-5.2% (current) | Very Low |
| Real estate (REITs) | ~8-9% historical | Medium-High |
| Gold | ~5-7% over very long periods | Medium |
| Savings account (avg) | 0.01-0.46% | None |
How to Interpret Your Return
Context is everything when evaluating investment returns:
- Benchmark it: Compare your return against a relevant index. Beating the S&P 500 by 2% annually is exceptional. Beating a savings account by 2% annually is barely acceptable.
- Risk-adjust: A 15% return requiring high volatility is riskier than an 8% stable return. The Sharpe ratio measures return-per-unit-of-risk.
- Net of inflation: A 10% nominal return with 3% inflation is only 7% real return. Always think in real (inflation-adjusted) terms.
- After fees: Always subtract management fees, expense ratios, and trading costs from your gross return to get your true net return.
Common Return Calculation Mistakes
Mistake: Simple average of yearly returns
If stocks go up 50% one year and down 33% the next, the simple average is 8.5%—but your actual return is $0 (you ended where you started). Use CAGR, not arithmetic mean.
Mistake: Ignoring the time dimension
A 20% return over 1 year is far different from a 20% return over 10 years. Always annualize returns when comparing different time periods.
Mistake: Recency bias
The last 2 years of returns tell you almost nothing about long-term expected returns. Look at 10, 20, or 30-year historical periods for realistic expectations.
Frequently Asked Questions
What's a good investment return for the stock market?
The S&P 500 has returned approximately 10% nominal and 7% inflation-adjusted annually over the past 50+ years. A diversified portfolio should target 6-8% after inflation for conservative planning. Beating 10% consistently requires skill or luck (usually luck).
How do I calculate return on a rental property?
Cap rate = Net Operating Income / Property Value. Cash-on-cash return = Annual Cash Flow / Total Cash Invested. Both matter—cap rate shows yield relative to value; cash-on-cash shows actual return on your cash investment.
What's the difference between nominal and real returns?
Nominal return is the stated percentage gain. Real return subtracts inflation. If your portfolio earns 12% and inflation is 3%, your real return is 9%—the actual purchasing power gain. Always plan using real returns for long-term goals.