Analyze the historical performance and CAGR of your DJIA investments.
Total Gain/Loss ($):$0.00
Absolute Return (ROI):0.00%
Compound Annual Growth Rate (CAGR):0.00%
Inflation-Adjusted Return (Real CAGR):0.00%
Final Value (w/ Dividends):$0.00
function calculateDowJonesReturn() {
// Get input values
var initial = parseFloat(document.getElementById("dj_initial_inv").value);
var finalVal = parseFloat(document.getElementById("dj_final_inv").value);
var dividends = parseFloat(document.getElementById("dj_dividends").value);
var years = parseFloat(document.getElementById("dj_years").value);
var inflation = parseFloat(document.getElementById("dj_inflation").value);
// Validation
if (isNaN(initial) || isNaN(finalVal) || isNaN(years) || years 0) {
cagrDecimal = Math.pow(totalFinalValue / initial, 1 / years) – 1;
}
var cagr = cagrDecimal * 100;
// 5. Inflation Adjusted Return (Fisher Equation)
// Real Return = ( (1 + Nominal Rate) / (1 + Inflation Rate) ) – 1
var nominalRate = cagrDecimal;
var inflationRateDecimal = inflation / 100;
var realReturnDecimal = ((1 + nominalRate) / (1 + inflationRateDecimal)) – 1;
var realReturn = realReturnDecimal * 100;
// Display Results
var resultArea = document.getElementById("dj_results_area");
var gainEl = document.getElementById("dj_total_gain");
var roiEl = document.getElementById("dj_roi");
var cagrEl = document.getElementById("dj_cagr");
var realReturnEl = document.getElementById("dj_real_return");
var finalTotalEl = document.getElementById("dj_final_total");
resultArea.style.display = "block";
// Formatting currency and percentages
gainEl.innerHTML = (totalGain >= 0 ? "+" : "") + "$" + totalGain.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
finalTotalEl.innerHTML = "$" + totalFinalValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
roiEl.innerHTML = roi.toFixed(2) + "%";
cagrEl.innerHTML = cagr.toFixed(2) + "%";
realReturnEl.innerHTML = realReturn.toFixed(2) + "%";
// Color coding for positive/negative
if (totalGain >= 0) {
gainEl.className = "dj-result-value dj-highlight";
roiEl.className = "dj-result-value dj-highlight";
cagrEl.className = "dj-result-value dj-highlight";
} else {
gainEl.className = "dj-result-value dj-negative";
roiEl.className = "dj-result-value dj-negative";
cagrEl.className = "dj-result-value dj-negative";
}
}
Understanding Dow Jones Rate of Return
The Dow Jones Industrial Average (DJIA) is one of the oldest and most watched stock indices in the world. Calculating the rate of return on an investment tracking the Dow requires understanding more than just the change in the index price. To get an accurate picture of performance, investors must consider price appreciation, dividend reinvestment, and the effects of inflation over time.
How the Calculator Works
This tool helps you evaluate the performance of an investment in the Dow Jones Industrial Average or a related ETF (like DIA) using standard financial formulas:
Total Gain/Loss: This calculates the raw dollar amount gained or lost, calculated as (Ending Value + Dividends) – Initial Investment.
Absolute Return (ROI): The simple percentage growth of your initial capital, not accounting for the time period.
CAGR (Compound Annual Growth Rate): This is the most critical metric for long-term investors. It represents the mean annual growth rate of an investment over a specified time period longer than one year. It smooths out the volatility of the stock market returns.
Inflation-Adjusted Return: Using the Fisher equation, this adjusts your CAGR based on the purchasing power of money, giving you the "Real" rate of return.
Why Dividends Matter in DJIA Returns
The Dow Jones is a price-weighted index composed of 30 prominent companies, many of which are established "blue-chip" firms that pay regular dividends. When calculating the rate of return, ignoring dividends can significantly undervalue the actual performance of the investment.
For example, while the price of the index might rise by 7% in a given year, the dividend yield might add another 2-3%, bringing the total return to 9-10%. Over a period of 10 or 20 years, reinvesting these dividends results in compound growth that often exceeds the return from price appreciation alone.
The Difference Between Nominal and Real Return
When investing in the stock market long-term, your nominal return is the percentage increase on paper. However, your wealth is actually defined by purchasing power. This calculator includes an input for the Inflation Rate to help you calculate the Real Return.
Historically, the US stock market (including the Dow) has provided a nominal return of approximately 10% annually before inflation. With average inflation historically around 3%, the real return for investors is often closer to 7%. During periods of high inflation, even a positive nominal return can result in a negative real return, meaning your money buys less than it did when you started.
Calculating CAGR for the Dow Jones
The Compound Annual Growth Rate is calculated using the formula:
CAGR = (Ending Value / Beginning Value)^(1 / Number of Years) - 1
Unlike a simple average return, which can be misleading if an investment drops significantly one year and rises the next, CAGR provides a geometric progression ratio that provides a constant rate of return that would yield the same result as the volatile market returns.