Calculate your real investment performance adjusted for fees and inflation.
Brokerage fees, management fees, or taxes paid.
Historical average or expected inflation rate.
Net Profit (after fees):–
Simple ROI (Total):–
Annualized Nominal Return (CAGR):–
Actual Real Return (Inflation Adjusted):–
function calculateActualReturn() {
// Get input values
var initial = parseFloat(document.getElementById('initialInvest').value);
var finalVal = parseFloat(document.getElementById('finalValue').value);
var fees = parseFloat(document.getElementById('totalFees').value);
var years = parseFloat(document.getElementById('yearsHeld').value);
var inflation = parseFloat(document.getElementById('inflationRate').value);
// Validation
if (isNaN(initial) || isNaN(finalVal) || isNaN(years) || years <= 0 || initial <= 0) {
alert("Please enter valid positive numbers for investment, final value, and years.");
return;
}
if (isNaN(fees)) fees = 0;
if (isNaN(inflation)) inflation = 0;
// 1. Calculate Net Profit
// Net Value = Final Value – Fees
var netValue = finalVal – fees;
var netProfit = netValue – initial;
// 2. Simple ROI (Total Return Percentage over the whole period)
var simpleRoi = (netProfit / initial) * 100;
// 3. Annualized Nominal Return (CAGR)
// Formula: (Ending Value / Beginning Value)^(1/n) – 1
var cagr = (Math.pow((netValue / initial), (1 / years)) – 1);
var nominalPercent = cagr * 100;
// 4. Actual Real Return (Fisher Equation)
// Formula: (1 + Nominal) / (1 + Inflation) – 1
// Note: Inflation input is percentage, so divide by 100
var inflationDecimal = inflation / 100;
var realReturnDecimal = ((1 + cagr) / (1 + inflationDecimal)) – 1;
var realReturnPercent = realReturnDecimal * 100;
// Display Results
document.getElementById('results-area').style.display = 'block';
// Formatting to currency and percentage
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
});
document.getElementById('res-netProfit').innerHTML = formatter.format(netProfit);
document.getElementById('res-simpleRoi').innerHTML = simpleRoi.toFixed(2) + "%";
document.getElementById('res-nominal').innerHTML = nominalPercent.toFixed(2) + "% / yr";
document.getElementById('res-real').innerHTML = realReturnPercent.toFixed(2) + "% / yr";
}
How to Calculate Actual Rate of Return
Investing is not just about the raw numbers you see on your brokerage statement. To truly understand the wealth-building power of your portfolio, you must calculate the Actual Rate of Return (often called the Real Rate of Return). This metric strips away the illusions created by inflation, taxes, and fees, revealing exactly how much purchasing power your money has gained.
Why Nominal Return is Misleading
The "Nominal Return" is the percentage growth usually advertised by funds or shown on your dashboard. For example, if you invest $10,000 and it grows to $11,000 in one year, your nominal return is 10%. While this looks good, it ignores two critical factors:
Inflation: The rising cost of goods decreases the value of every dollar you earn.
Costs: Trading fees, expense ratios, and advisory fees directly reduce your net profit.
The Formula for Actual Rate of Return
To find the actual rate of return, we typically use a two-step process. First, we determine the Annualized Nominal Return (CAGR), and then we adjust it using the Fisher Equation.
While your bank statement shows an 8.3% return, your actual purchasing power only increased by 5.1% annually.
Why This Matters
Understanding your actual rate of return is crucial for retirement planning. If you project your wealth using nominal returns (e.g., 8%) but inflation eats away 3% of that, your future lifestyle may be underfunded. Always use the real rate of return when calculating how long your money will last.