Rate of Return (RoR) Calculator
Calculate the percentage gain or loss on your investments.
Investment Results
Understanding Rate of Return (RoR)
The Rate of Return (RoR) is a fundamental metric used to measure the profit or loss of an investment relative to its initial cost. It is typically expressed as a percentage. Whether you are investing in stocks, real estate, or a small business, knowing your RoR helps you evaluate the performance of your capital over time.
The Simple Rate of Return Formula
The most basic way to calculate return is to take the difference between the final value and the initial cost, add any income received, and divide by the initial cost.
What is Annualized Rate of Return?
Simple return doesn't account for time. If you earn 50% over 10 years, that is very different from earning 50% in 1 year. The Annualized Rate of Return (or Compound Annual Growth Rate – CAGR) provides the geometric mean return per year, allowing you to compare investments held for different lengths of time.
Practical Example
- Initial Investment: 10,000
- Final Value: 12,000
- Dividends Received: 500
- Period: 2 Years
In this scenario, your total gain is 2,500 (2,000 capital gain + 500 dividends). Your Simple RoR is 25%. However, your Annualized RoR would be approximately 11.8%, representing the actual growth rate per year.
Why RoR Matters
Calculating your rate of return allows you to:
- Compare different asset classes (e.g., Stocks vs. Bonds).
- Determine if your investment is beating inflation.
- Set realistic future financial goals based on historical performance.
- Evaluate the impact of fees and taxes on your net growth.