Rate of Return Calculator
Enter your starting value, ending value, and time period to find your annualised rate of return (CAGR). Add a regular annual contribution to model ongoing investing, or enter the rate and initial amount to project a future value. The calculator shows a year-by-year growth chart and a full accumulation schedule so you can see exactly how your money compounds.
What is rate of return?
Rate of return (ROR) is the net gain or loss on an investment over a specified period, expressed as a percentage of the initial cost. A positive rate of return means the investment grew; a negative one means it shrank. The most useful form for comparing investments of different lengths is the annualised rate of return, also known as the Compound Annual Growth Rate (CAGR). CAGR answers the question: if my investment grew at a constant rate each year, what would that rate be? It smooths out year-to-year volatility and makes it easy to compare a two-year bond against a fifteen-year stock holding on the same basis.
How to calculate rate of return
For a lump-sum investment with no interim contributions, the formula is: ROR = (Final Value / Initial Value)^(1/Years) - 1. For example, $10,000 growing to $18,000 over 10 years gives (18000/10000)^(0.1) - 1 = 6.05% per year. When you add regular contributions, the formula becomes more complex because each payment compounds for a different length of time. The calculator uses the standard future-value annuity equation and solves it iteratively (Newton-Raphson) to find the exact annualised rate that reconciles your starting value, contributions, time horizon, and ending value.
Simple vs. annualised return
The simple (or total) return is just (Final - Initial) / Initial. A $10,000 investment worth $18,000 has a simple return of 80%, regardless of whether it took 3 years or 30. Simple return is useful for a quick profit-and-loss snapshot, but it is not suitable for comparing investments over different periods. Annualised return (CAGR) normalises for time, making apples-to-apples comparisons possible. This calculator shows both: the CAGR as the primary result and the total return as a supplementary figure.
The Rule of 72
A useful shortcut for estimating how long it takes money to double is the Rule of 72: divide 72 by the annual rate of return. At 6% per year, money doubles in about 12 years (72 / 6 = 12). At 9%, it doubles in 8 years. The rule slightly underestimates true doubling time for very high rates and overestimates it for very low ones, but it is accurate enough for quick mental arithmetic. This calculator includes the Rule of 72 doubling time in the "show your work" panel whenever the rate is positive.
Limitations and what this calculator does not include
This calculator computes nominal (not inflation-adjusted) returns. To find the real rate of return, subtract the inflation rate from the annualised return. It also does not account for taxes on dividends, capital gains distributions, or fees (expense ratios, advisory fees, trading commissions). In practice, fees and taxes can reduce your effective return by 0.5-2 percentage points per year, which compounds significantly over long periods. For a more complete picture, subtract estimated annual costs from the rate before entering it.
Historical average annual returns by asset class
| Asset class | Typical annual return | Risk level |
|---|---|---|
| Cash / money market | 0.5-2% | Very low |
| Short-term government bonds | 2-4% | Low |
| Investment-grade corporate bonds | 3-5% | Low to moderate |
| Balanced portfolio (60/40) | 5-7% | Moderate |
| Large-cap stocks (e.g. S&P 500) | 7-10% | Moderate to high |
| Small-cap stocks | 9-12% | High |
| Emerging market equities | 6-11% | High |
| Real estate (REITs) | 7-10% | Moderate to high |
Long-run averages commonly cited in financial literature. Past performance does not guarantee future results.
Frequently asked questions
What is the difference between rate of return and ROI?
Rate of return and return on investment (ROI) are often used interchangeably, but there is a subtle difference. ROI is typically expressed as a simple percentage: (Net Profit / Cost) x 100, with no time dimension. Rate of return usually implies an annualised figure, making it more useful for comparing investments of different durations. CAGR (Compound Annual Growth Rate) is the most precise version of annualised rate of return.
What is a good rate of return on an investment?
It depends on the asset class and time period. Broad stock market indexes have historically returned roughly 7-10% per year over long horizons. Bonds have returned 3-5%. Cash and savings accounts often return 1-3%. A "good" rate of return is one that exceeds your cost of capital, beats inflation, and compensates you fairly for the risk you are taking. As a rough benchmark, many financial planners use 7% as a conservative long-run assumption for a diversified equity portfolio.
How does compound interest affect rate of return?
Compounding means that growth earns growth. Each year, your return is calculated on a larger base because last year's gains are included. The longer the time horizon, the more dramatic the compounding effect. For example, at 8% per year, $10,000 grows to roughly $21,600 in 10 years and nearly $100,600 in 30 years. The "total growth" figure in this calculator shows exactly how much of your final balance came from compounding rather than from your own contributions.
What is CAGR and how is it different from average return?
CAGR (Compound Annual Growth Rate) is the rate that, if applied consistently each year, would take an investment from its starting value to its ending value. Average (arithmetic mean) return simply averages the annual percentage changes. Because of how losses interact with gains, CAGR is almost always lower than the arithmetic average, and it is the more accurate measure of actual investor experience. For example, a fund that gains 50% one year and loses 33% the next has an arithmetic average of +8.5% but a CAGR of 0% - your money is exactly where it started.
How do I account for dividends in the rate of return?
Include reinvested dividends in the "final value" field. If you received $2,000 in dividends over the holding period and they were reinvested, add that to the market value of your shares when you sold (or current value). This gives you the total return including income, not just the price return. If dividends were taken as cash rather than reinvested, include them as annual contributions to get an accurate picture.
What does a negative rate of return mean?
A negative rate of return means the investment lost value over the period. For example, if $10,000 fell to $8,000 over two years, the annualised rate of return is (8000/10000)^(0.5) - 1 = -10.6% per year. Negative returns are normal for any risky asset in the short run; what matters for long-term investors is the return over the full holding period, not any individual year.