Bureau of Wealth

ROI Calculator: Total and Annualised Return

By the Bureau of Wealth team Updated

This calculator is general information, not financial advice. Check your own figures with the provider or a qualified adviser before acting on them.

Enter what you invested, what it is worth now, any costs and how long you held it to see your gain or loss, your total return and your annualised return.

Dealing fees, platform charges and any other costs you paid.

Check the highlighted fields to see your results.

What this calculator assumes

  • You invested one amount at the start and nothing since. The calculator ignores the timing of extra payments in and withdrawals, so it is a simple return, not a time-weighted or money-weighted return.
  • Fees and costs are added to what you invested, as if you paid them all at the start.
  • Dividends and interest count only if they are in the value you enter. Income that was reinvested usually already is. If it was paid out to you, add it to the value.
  • Tax is not deducted. Gains and dividends in a general investment account may be taxed, while investments held in an ISA or pension are sheltered.
  • Inflation is ignored, so the return is in pounds at face value, not in terms of what those pounds can buy.

You might also want to check

How return on investment is worked out

Return on investment, or ROI, compares what you gained with what you put in. The calculator first adds your fees and costs to the amount you invested to get your total outlay. Your gain or loss is the current value minus that outlay. ROI is the gain divided by the outlay, shown as a percentage.

The annualised return turns that total into an equivalent steady yearly rate. It divides the current value by your outlay, raises the result to the power of one divided by the number of years you held the investment, and subtracts one. This is the compound annual growth rate: the single yearly return that would turn your outlay into the value you have now.

A worked example

Say you put £10,000 into a fund, paid £100 in dealing and platform charges, and five years later it is worth £14,000. Your outlay is £10,100 and your gain is £3,900. That is a total return of 38.61% and an annualised return of 6.75%. You can check it in a spreadsheet with =(14000/10100)^(1/5)-1, which returns 0.0675.

Without the £100 of charges, the same investment would show 40.00% in total and 6.96% a year. Leaving costs out flatters every result. MoneyHelper points out that fees vary by fund, product and provider and are not always easy to spot, so check your platform's statements for everything you paid.

Why the annualised return matters

A total return means little without the time it took. A 38.61% gain in one year is an annualised 38.61%. The same gain over 10 years is only 3.32% a year. The annualised figure lets you compare investments held for different lengths of time, or compare an investment with the AER on a savings account.

Be careful with very short holding periods. A 5% gain in three months annualises to 21.55%, but that assumes the same pace for a whole year, which is rarely realistic. Losses work the same way in reverse: £10,000 falling to £9,000 over two years is a 10% loss in total and about 5.13% a year.

When a simple return is not enough

This calculator treats your investment as a single sum paid in on day one. If you paid in over time, such as monthly payments into a stocks and shares ISA or a workplace pension, or took money out, the result will be off, because later payments were not invested for the whole period. For those, use a money-weighted return, such as the XIRR function in a spreadsheet with the date and amount of every payment in and out, or ask your provider whether it shows a personal rate of return.

A good past return is not a promise. MoneyHelper's beginner's guide reminds you that investments can go down as well as up, which means you could lose money.

Related calculators

To project how money might grow from here at a steady rate, with regular monthly payments, use the compound interest calculator.

Frequently asked questions

What is the difference between ROI and annualised return?

ROI is your total gain or loss as a percentage of what you put in, however long it took. The annualised return spreads that over the years you held the investment as one steady yearly rate.

What costs should I include?

Include anything you paid to buy, hold or sell the investment, such as dealing charges, platform fees and adviser fees. A fund's ongoing charges figure is already taken out of its price, so do not add it again.

How do I include dividends?

If you hold accumulation units or reinvested the income, it is already part of the current value. If dividends were paid out to you, add the total to the value you enter.

Can I use this for a pension I pay into every month?

Only as a rough guide. The calculator assumes all the money went in at the start, so regular payments make the annualised figure misleading. A money-weighted return, such as a spreadsheet's XIRR function, handles this properly.

Does a good ROI mean I should invest more?

Not on its own. Past returns do not predict future ones, so also think about the risk, the charges and whether the investment still suits your goals.

Sources

Figures come from institutions millions of people rely on. How we keep calculators accurate.