Bureau of Wealth

ROI Calculator: Total and Annualized 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 annualized 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 deposits 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. Reinvested dividends usually already are. If you took them as cash, add them to the value.
  • Taxes are not deducted. Capital gains tax or tax on dividends in a taxable account would lower what you keep, while growth in a 401(k) or IRA follows different rules.
  • Inflation is ignored, so the return is in dollars at face value, not in terms of what those dollars can buy.

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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 annualized 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 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 invested $10,000, paid $100 in fees and the investment is worth $14,000 five years later. Your outlay is $10,100 and your gain is $3,900. That is a total return of 38.61% and an annualized 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 costs, the same investment would show 40.00% in total and 6.96% a year. Leaving costs out makes every investment look better than it was, which is why Investor.gov advises checking whether fees are included in any performance figure you are shown.

Why the annualized return matters

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

Be careful with very short holding periods. A 5% gain in three months annualizes to 21.55%, but that assumes the same pace for a full 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 put in on day one. If you added money over time, such as regular 401(k) contributions, or took money out, the result will be off, because later deposits were not invested for the whole period. For those accounts, use a money-weighted return, such as the XIRR function in a spreadsheet with the date and amount of every deposit and withdrawal, or ask your provider whether it reports a personal rate of return for your account.

Remember too that a past return is not a promise. Investor.gov notes that past performance does not necessarily predict future results.

Related calculators

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

Frequently asked questions

What is the difference between ROI and annualized return?

ROI is your total gain or loss as a percentage of what you put in, however long it took. The annualized 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 commissions, account fees and advisory fees charged separately. A fund's expense ratio is already taken out of its value, so do not add it again.

How do I include dividends?

If dividends were reinvested, they are already part of the current value. If you received them as cash, add the total to the value you enter so the return reflects them.

Can I use this if I added money over time?

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

Does a good ROI mean I should buy more?

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

Sources

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