Rate of Return Calculator

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Rate of Return Calculator
Simple Rate of ReturnAnnualized Rate of Return (CAGR)
Result:
function calculateROR(){var iv=parseFloat(document.getElementById('initial_value').value);var fv=parseFloat(document.getElementById('final_value').value);var div=parseFloat(document.getElementById('dividends').value)||0;var y=parseFloat(document.getElementById('years').value);var type=document.getElementById('calc_type').value;var showSteps=document.getElementById('steps').checked;if(isNaN(iv)||isNaN(fv)||iv<=0){alert('Please enter valid positive numbers for Initial and Ending values.');return;}var gain=fv-iv+div;var ror=(gain/iv)*100;var cagr=(Math.pow(((fv+div)/iv),(1/y))-1)*100;var ansDiv=document.getElementById('answer');ansDiv.style.display='block';var html="
";if(type==='basic'){html+="Total Rate of Return: "+ror.toFixed(2)+"%
";}else{html+="Annualized Return (CAGR): "+cagr.toFixed(2)+"%
";}html+="Total Gain/Loss: $"+gain.toLocaleString(undefined,{minimumFractionDigits:2,maximumFractionDigits:2})+"
";if(showSteps){html+="
Steps:
";html+="1. Total Gain = ($"+fv+" – $"+iv+") + $"+div+" = $"+gain.toFixed(2)+"
";html+="2. Basic ROR = ($"+gain.toFixed(2)+" / $"+iv+") × 100 = "+ror.toFixed(2)+"%
";if(y>0){html+="3. Annualized = (("+ (fv+div) +"/"+iv+")1/"+y+" – 1) × 100 = "+cagr.toFixed(2)+"%";}html+="
";}ansDiv.innerHTML=html;}

Calculator Use

The rate of return calculator is an essential tool for investors to measure the profitability of an investment over time. Whether you are tracking stocks, real estate, or a private business venture, knowing your percentage gain or loss allows you to compare different assets on an equal playing field. This calculator handles both simple total returns and annualized returns (CAGR), factoring in any dividends or passive income received during the holding period.

Initial Investment
The amount of money originally paid for the asset or the starting balance of the account.
Ending Value
The current market value of the asset or the price at which it was sold.
Dividends/Income
Any additional cash flow generated by the investment, such as stock dividends, bond interest, or rental income.
Time Period (Years)
The duration for which the investment was held, used to calculate the annualized return.

How It Works

To determine the performance of an investment, the rate of return calculator uses two primary formulas. The "Simple Rate of Return" looks at the total growth regardless of time, while the "Annualized Return" (Compound Annual Growth Rate) normalizes the return to a one-year timeframe.

Simple ROR = [(Current Value – Original Value + Income) / Original Value] × 100

The annualized formula is slightly more complex as it accounts for the effects of compounding:

Annualized ROR = [((Current Value + Income) / Original Value)1/n – 1] × 100

  • n represents the number of years.
  • Income includes all dividends or interest distributions.
  • Original Value is your cost basis.

Calculation Example

Example: Imagine you purchased 50 shares of a stock at $20 per share (Initial Investment = $1,000). Three years later, the stock is worth $25 per share (Ending Value = $1,250). During those three years, you received a total of $50 in dividends.

Step-by-step solution:

  1. Initial Investment = $1,000
  2. Ending Value = $1,250
  3. Dividends = $50
  4. Years = 3
  5. Total Gain = ($1,250 – $1,000) + $50 = $300
  6. Simple ROR = ($300 / $1,000) × 100 = 30%
  7. Annualized ROR = [($1,300 / $1,000)1/3 – 1] × 100 = 9.14%

Common Questions

What is a "good" rate of return?

A "good" return is subjective and depends on your risk tolerance and the asset class. Historically, the S&P 500 has averaged an annualized return of about 10% before inflation. Real estate often yields 7-12%, while savings accounts may offer much less.

Why use annualized return instead of simple return?

Simple return can be misleading for long-term investments. A 50% return over 20 years is much less impressive than a 50% return over 2 years. Annualizing allows you to compare the efficiency of your capital across different time horizons.

Does this calculator include inflation?

This rate of return calculator provides the "nominal" rate of return. To find the "real" rate of return, you would need to subtract the inflation rate from the result provided here.

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