Calculate your annualized rate of return (ROR) with ease. Compare compounding frequencies, view growth charts, and use our precise formula to track investment performance.
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How to Calculate Your Rate of Return
The Rate of Return (ROR) is a measurement used to determine the profit or loss of an investment over a specific period. It is expressed as a percentage of the investment’s initial cost. Understanding your ROR is vital for comparing the performance of different assets, such as stocks, bonds, or real estate.
Our calculator determines the Annualized Rate of Return, which accounts for the time value of money and compounding. This allows you to see how your money would grow if the rate remained constant over the entire duration of the investment.
The Basic ROR Formula
For a simple, non-annualized return, you subtract the starting value from the ending value and divide by the starting value:
Compounded Annual Growth Rate (CAGR)
When you account for annual compounding, the formula becomes more complex. It looks like this:
Where $FV$ is the Final Value, $PV$ is the Initial Value (Present Value), and $t$ is the time in years.
Frequently Asked Questions
A Simple Return tells you the total percentage gain or loss regardless of how long it took. An Annualized Return (like the one in this calculator) shows you the average growth per year. This is a much better way to compare a 5-year investment to a 10-year investment.
Compounding is the process where your interest earns interest. The more often this happens (Daily vs. Annually), the higher your final value will be, even if the interest rate is the same. Our calculator supports multiple frequencies, including Continuous Compounding, which uses the mathematical constant $e$:
A “good” return depends on your risk tolerance and the asset class. Historically, the S&P 500 has provided an average annualized return of about 10% before inflation. However, safer investments like savings accounts or government bonds typically offer lower returns in exchange for lower risk.
This calculator provides the Nominal Rate of Return. To find your “Real Rate of Return,” you would need to subtract the annual inflation rate from the result. For example, if your ROR is 8% and inflation is 3%, your real purchasing power increased by approximately 5%.