Investment Rate of Return Calculator Excel

by

Investment Rate of Return Calculator

Analyze your investment performance and calculate annualized returns similar to Excel formulas.

Total Return
0%
Annualized Return (CAGR)
0%
Total Profit: $0.00
function calculateROR() { var initialValue = parseFloat(document.getElementById('initialValue').value); var finalValue = parseFloat(document.getElementById('finalValue').value); var dividends = parseFloat(document.getElementById('dividends').value) || 0; var years = parseFloat(document.getElementById('years').value); if (isNaN(initialValue) || isNaN(finalValue) || isNaN(years) || initialValue <= 0 || years <= 0) { alert("Please enter valid positive numbers for investment amounts and period."); return; } var profit = (finalValue + dividends) – initialValue; var totalRoR = (profit / initialValue) * 100; // Annualized Return (CAGR) Formula: ((Ending / Beginning)^(1/n)) – 1 var annualizedRoR = (Math.pow((finalValue + dividends) / initialValue, 1 / years) – 1) * 100; document.getElementById('totalReturn').innerText = totalRoR.toFixed(2) + "%"; document.getElementById('annualizedReturn').innerText = annualizedRoR.toFixed(2) + "%"; document.getElementById('totalProfit').innerText = "$" + profit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('rorResultArea').style.display = 'block'; }

Understanding Investment Rate of Return

Calculating your Investment Rate of Return (RoR) is crucial for evaluating the efficiency of different assets. While simple profit shows you how much money you made, the Rate of Return allows you to compare a small investment that gained a lot against a large investment that gained a little.

Calculating RoR in Excel

In Microsoft Excel, there are two primary ways to calculate these figures using the data from the calculator above:

  • Total Return: =(Final_Value + Dividends - Initial_Investment) / Initial_Investment
  • Annualized Return (CAGR): =((Final_Value + Dividends) / Initial_Investment)^(1 / Years) - 1

Example Calculation

Suppose you invested $10,000 in a stock. After 3 years, the stock is worth $12,500, and you collected $500 in dividends over that period.

  1. Total Profit: $12,500 + $500 – $10,000 = $3,000.
  2. Total Rate of Return: ($3,000 / $10,000) = 30%.
  3. Annualized Rate of Return: ((13,000 / 10,000)^(1/3)) – 1 = 9.14%.

Why Use Annualized Return?

Total return can be misleading if the timeframes are different. A 50% return over 10 years is significantly less impressive than a 50% return over 2 years. By annualizing the return (often called Compound Annual Growth Rate or CAGR), you can compare all investments on a "per year" basis, making it easier to see which asset performed best relative to the time your capital was tied up.

Pro Tip: When using Excel for complex cash flows (investing different amounts at different times), use the XIRR function instead for higher accuracy.

Leave a Comment