body {
font-family: -apple-system, BlinkMacSystemFont, "Segoe UI", Roboto, Helvetica, Arial, sans-serif;
line-height: 1.6;
color: #333;
max-width: 800px;
margin: 0 auto;
padding: 20px;
}
.ror-calculator-container {
background-color: #f8f9fa;
border: 1px solid #e9ecef;
border-radius: 8px;
padding: 25px;
margin-bottom: 30px;
box-shadow: 0 4px 6px rgba(0,0,0,0.05);
}
.ror-form-group {
margin-bottom: 15px;
}
.ror-form-group label {
display: block;
margin-bottom: 5px;
font-weight: 600;
color: #495057;
}
.ror-input-wrapper {
position: relative;
}
.ror-input-wrapper input {
width: 100%;
padding: 10px;
border: 1px solid #ced4da;
border-radius: 4px;
font-size: 16px;
box-sizing: border-box;
}
.ror-currency-symbol {
position: absolute;
left: 10px;
top: 10px;
color: #6c757d;
}
.ror-input-padded {
padding-left: 25px !important;
}
.ror-btn {
background-color: #28a745;
color: white;
border: none;
padding: 12px 20px;
font-size: 16px;
border-radius: 4px;
cursor: pointer;
width: 100%;
font-weight: bold;
transition: background-color 0.2s;
}
.ror-btn:hover {
background-color: #218838;
}
.ror-results {
margin-top: 20px;
background-color: #fff;
border: 1px solid #dee2e6;
border-radius: 4px;
padding: 15px;
display: none;
}
.ror-result-row {
display: flex;
justify-content: space-between;
margin-bottom: 10px;
padding-bottom: 10px;
border-bottom: 1px solid #f1f3f5;
}
.ror-result-row:last-child {
border-bottom: none;
margin-bottom: 0;
padding-bottom: 0;
}
.ror-result-label {
color: #6c757d;
}
.ror-result-value {
font-weight: bold;
font-size: 18px;
color: #212529;
}
.ror-highlight {
color: #28a745;
}
.ror-negative {
color: #dc3545;
}
.ror-article h2 {
color: #2c3e50;
margin-top: 30px;
border-bottom: 2px solid #eee;
padding-bottom: 10px;
}
.ror-article h3 {
color: #34495e;
margin-top: 25px;
}
.ror-article ul {
background-color: #f8f9fa;
padding: 20px 40px;
border-radius: 5px;
}
.ror-article li {
margin-bottom: 10px;
}
.ror-error {
color: #dc3545;
font-size: 14px;
margin-top: 5px;
display: none;
}
How to Calculate a Rate of Return
Calculating the Rate of Return (RoR) is the fundamental method used to evaluate the performance of an investment over a specific period. Whether you are analyzing stock performance, real estate appreciation, or the growth of a small business, understanding your RoR is crucial for making informed financial decisions.
What is Rate of Return (RoR)?
The rate of return is the net gain or loss of an investment expressed as a percentage of the initial cost. It tells you exactly how much your money has grown (or shrunk) relative to the amount you originally put in. A positive RoR indicates a profit, while a negative RoR indicates a loss.
The Basic Rate of Return Formula
The most common way to calculate the simple rate of return is using the following formula:
Rate of Return = [(Current Value – Original Value + Income) / Original Value] × 100
Key Components:
- Original Value: The initial amount of money invested (your cost basis).
- Current Value: The market value of the investment at the end of the period.
- Income: Any additional cash flow generated by the asset, such as dividends, interest payments, or rent collected.
Example Calculation
Imagine you purchased a stock for $1,000. One year later, the stock is worth $1,200, and you received $50 in dividends.
- Step 1: Calculate the total gain: $1,200 (Current) – $1,000 (Original) + $50 (Income) = $250.
- Step 2: Divide by the original investment: $250 / $1,000 = 0.25.
- Step 3: Convert to percentage: 0.25 × 100 = 25% Rate of Return.
Simple Return vs. Annualized Return (CAGR)
The simple rate of return works well for investments held for one year or less. However, if you have held an investment for multiple years, the simple return can be misleading. It doesn't account for the time value of money or compound growth.
For long-term investments, you should calculate the Annualized Return, often referred to as the Compound Annual Growth Rate (CAGR). This metric provides a smoothed annual rate, showing what you effectively earned each year on average.
CAGR = [(Ending Value + Income) / Beginning Value](1 / Number of Years) – 1
Why Calculating RoR Matters
Investors use RoR to compare assets with different risk profiles. For example, a 5% return on a safe government bond might be preferable to a 6% return on a volatile cryptocurrency. By consistently calculating your rate of return, you can benchmark your portfolio against market indices like the S&P 500 to see if your investment strategy is working.
function calculateRateOfReturn() {
// 1. Get input values by ID
var initialInput = document.getElementById('ror-initial');
var finalInput = document.getElementById('ror-final');
var dividendsInput = document.getElementById('ror-dividends');
var periodInput = document.getElementById('ror-period');
var resultContainer = document.getElementById('ror-results');
var errorMsg = document.getElementById('ror-error-msg');
// 2. Parse values to floats
var initial = parseFloat(initialInput.value);
var final = parseFloat(finalInput.value);
var dividends = parseFloat(dividendsInput.value);
var period = parseFloat(periodInput.value);
// 3. Handle empty optional fields (treat as 0)
if (isNaN(dividends)) {
dividends = 0;
}
// 4. Validate inputs
// Initial investment is required and must be non-zero to avoid division by zero
if (isNaN(initial) || isNaN(final) || initial === 0) {
errorMsg.style.display = 'block';
resultContainer.style.display = 'none';
return;
} else {
errorMsg.style.display = 'none';
}
// 5. Calculate Net Profit/Loss
var totalGain = (final – initial) + dividends;
// 6. Calculate Simple Return
var simpleReturn = (totalGain / initial) * 100;
// 7. Calculate Annualized Return (CAGR) if period is provided and > 0
var annualizedReturn = null;
if (!isNaN(period) && period > 0) {
// Formula: ((End + Div) / Start) ^ (1/n) – 1
var totalEndValue = final + dividends;
// Handle negative total end value edge case (cannot take fractional root of negative number easily in this context)
if (totalEndValue >= 0 && initial > 0) {
var ratio = totalEndValue / initial;
var exponent = 1 / period;
annualizedReturn = (Math.pow(ratio, exponent) – 1) * 100;
} else {
annualizedReturn = "N/A (Negative Value)";
}
}
// 8. Update DOM Elements
resultContainer.style.display = 'block';
var profitEl = document.getElementById('ror-profit-val');
var simpleEl = document.getElementById('ror-simple-val');
var annualEl = document.getElementById('ror-annual-val');
// Format Profit
profitEl.innerText = '$' + totalGain.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
if (totalGain >= 0) {
profitEl.className = 'ror-result-value ror-highlight';
profitEl.innerText = '+' + profitEl.innerText;
} else {
profitEl.className = 'ror-result-value ror-negative';
}
// Format Simple Return
simpleEl.innerText = simpleReturn.toFixed(2) + '%';
if (simpleReturn >= 0) {
simpleEl.className = 'ror-result-value ror-highlight';
simpleEl.innerText = '+' + simpleEl.innerText;
} else {
simpleEl.className = 'ror-result-value ror-negative';
}
// Format Annualized Return
if (annualizedReturn !== null && typeof annualizedReturn === 'number') {
annualEl.innerText = annualizedReturn.toFixed(2) + '%';
if (annualizedReturn >= 0) {
annualEl.className = 'ror-result-value ror-highlight';
annualEl.innerText = '+' + annualEl.innerText;
} else {
annualEl.className = 'ror-result-value ror-negative';
}
} else if (typeof annualizedReturn === 'string') {
annualEl.innerText = annualizedReturn;
annualEl.className = 'ror-result-value';
} else {
annualEl.innerText = 'N/A (Enter Years)';
annualEl.className = 'ror-result-value';
}
}