function calculateReturn() {
// Get input values
var startBal = parseFloat(document.getElementById('startBalance').value);
var contrib = parseFloat(document.getElementById('contributions').value);
var withdraw = parseFloat(document.getElementById('withdrawals').value);
var endBal = parseFloat(document.getElementById('endBalance').value);
var years = parseFloat(document.getElementById('timePeriod').value);
// Validation: Check if required fields are numbers
if (isNaN(startBal) || isNaN(endBal)) {
alert("Please enter at least the Beginning and Ending Balances.");
return;
}
// Set defaults for optional fields if empty
if (isNaN(contrib)) contrib = 0;
if (isNaN(withdraw)) withdraw = 0;
if (isNaN(years) || years 0 && (startBal + netFlow) > 0) {
// For CAGR, we often treat the denominator as the total invested base
// However, to be consistent with the simple rate derived above:
var growthFactor = 1 + (simpleRate / 100);
if (growthFactor > 0) {
annualizedRate = (Math.pow(growthFactor, (1 / years)) – 1) * 100;
}
}
// Formatting Output
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
document.getElementById('netProfit').innerText = formatter.format(profit);
document.getElementById('netFlow').innerText = formatter.format(netFlow);
// Color coding for positive/negative returns
var simpleElem = document.getElementById('simpleReturn');
var annualElem = document.getElementById('annualReturn');
simpleElem.innerText = simpleRate.toFixed(2) + "%";
simpleElem.style.color = simpleRate >= 0 ? "#228be6" : "#e03131";
annualElem.innerText = annualizedRate.toFixed(2) + "%";
annualElem.style.color = annualizedRate >= 0 ? "#212529" : "#e03131";
// Show results
document.getElementById('results').style.display = 'block';
}
How Is Personal Rate of Return Calculated?
Calculating your personal rate of return is essential for understanding the true performance of your investment portfolio. Unlike a simple percentage change in a stock's price, your personal return must account for the timing and magnitude of your cash flows—specifically the money you deposit (contributions) and the money you take out (withdrawals).
Many investors mistakenly calculate return by simply dividing their current balance by their initial balance. However, if you added $5,000 to your account halfway through the year, a simple division would incorrectly treat that contribution as investment growth, inflating your success metrics. The calculator above uses a method that adjusts for these cash flows to give you a realistic picture of your performance.
The Logic Behind the Calculation
To accurately determine how your money is working for you, we look at three main components:
Net Profit: The actual dollar amount gained or lost, calculated as your Ending Balance minus your Total Invested Capital (Starting Balance + Contributions – Withdrawals).
Average Invested Capital: The "weighted" amount of money you had at risk during the period.
Time Period: The duration of the investment, used to calculate annualized returns (CAGR).
The Modified Dietz Method
This calculator utilizes a simplified version of the Modified Dietz Method. This is an industry-standard approach for calculating personal returns when the exact dates of every transaction are not used. It assumes that, on average, your contributions and withdrawals occurred halfway through the period.
Net Profit = Ending Value – (Beginning Value + Contributions – Withdrawals)
Net Cash Flow = Contributions – Withdrawals
Why Annualized Return Matters
The "Simple Personal Rate of Return" tells you the total percentage gained over the entire specific period you entered. However, if that period is 5 years, a 20% total return is much less impressive than a 20% return over 1 year.
The Annualized Return (often referred to as Compound Annual Growth Rate or CAGR) normalizes this number. It answers the question: "What consistent yearly interest rate would I need to achieve this same result?" This metric allows you to compare your personal performance against standard annual benchmarks like the S&P 500 or inflation rates.
Example Scenario
Imagine you started with $10,000. During the year, you added $5,000 of your salary into the account. At the end of the year, your balance is $16,000.
Using the basic math without adjustment, it looks like you grew $10k to $16k (60%). But in reality, $5k of that "growth" was just your own savings.
Net Profit: $16,000 – ($10,000 + $5,000) = $1,000
Average Capital: $10,000 + (0.5 × $5,000) = $12,500
Personal Return: $1,000 / $12,500 = 8.00%
This 8% figure accurately reflects the efficiency of your investments, separating your savings habits from your investment returns.