Rate of Return Calculator

To calculate rate of return, use (final value − initial value + income) ÷ initial value × 100 for the total return, then annualize it with CAGR. For example, $10,000 that grows to $16,000 in 5 years is a 60% total return, or about 9.86% per year annualized. This rate of return calculator gives you both figures from four simple inputs.

Related tools in this category answer neighboring questions: the CAGR Calculator is the focused single-rate version, while for retirement-account growth use the Retirement Calculator, 401(k) Calculator, Roth IRA Calculator, or IRA Calculator. Use this page when you already know a start value, an end value and a holding period and want the return per year.

The rate of return formula

Total return measures the whole gain over the holding period:

To turn that into a per-year rate that accounts for compounding, use the compound annual growth rate (CAGR):

where initial is the amount you invested, final is the current or sale value, income is any dividends, interest or rent received, and years is how long you held it. The ending value used for annualizing includes that income, assuming it was reinvested.

Worked example, step by step

Take the $10,000 to $16,000 example over 5 years with no separate income:

• Total return: (16,000 − 10,000) ÷ 10,000 = 0.60 = 60%.
• Ratio: 16,000 ÷ 10,000 = 1.60.
• Annualized: 1.60^(1/5) − 1 = 1.0986 − 1 = 0.0986 = 9.86% per year.

Now add $500 of dividends received along the way. The total return rises to (16,000 − 10,000 + 500) ÷ 10,000 = 65%, and the annualized return climbs to about 10.53% per year, which is why ignoring income understates how an investment actually performed.

Total return vs. annualized return

These two numbers answer different questions. Total return tells you how much your money grew overall. Annualized return (CAGR) tells you the equivalent steady yearly rate. The longer the holding period, the larger the gap between them: a 60% total return is about 9.86%/yr over 5 years but only about 2.38%/yr over 20 years. Always annualize before comparing investments held for different lengths of time.

Total return to annualized return conversion table

The same total return means very different things depending on how long you held. This matrix converts a total return into its annualized rate (CAGR) across common holding periods, computed with (1 + total)^1/years − 1.

Read across a row to see how the same total return shrinks to a smaller annual rate the longer it is spread. Doubling your money (100% total) is a 14.87%/yr return over 5 years but only 3.53%/yr over 20.

How to use this calculator

1. Initial value: enter what you originally invested, which is your cost basis.
2. Final value: enter the current value, or the sale price if you have already sold.
3. Holding period: enter the number of years you held it. Use decimals for partial years (0.5 = six months).
4. Income (optional): add dividends, interest, or rent received over the period. Leave it at zero for a price-only return.

The results update as you type: read the two headline figures (total return and annualized return), plus the gain, the price-vs-income split, and a year-by-year growth path at your annualized rate. A partial final year, such as the half year in a 2.5-year holding period, gets its own row.

Who this calculator is for

• Stock and fund investors checking how a holding has actually performed per year.
• Comparison shoppers weighing two investments held for different lengths of time.
• Real-estate owners annualizing a property's appreciation plus rental income.
• Savers turning a multi-year balance change into a comparable yearly rate.
• Students and analysts who need a clean CAGR for a report or a model.

Key terms explained

• Total return: the full percentage gain (or loss) over the whole holding period, including income.
• Annualized return / CAGR: the equivalent constant yearly rate that compounds to the same result.
• Price (capital) return: the gain from the value rising, excluding any income.
• Income return: the part of the return that came from dividends, interest or rent.
• Cost basis: what you originally paid, the initial value the return is measured against.
• Reinvestment: the CAGR figure assumes income is put back to work; spending it instead lowers your effective compounded rate.

Three quick scenarios

• Steady grower: $20,000 to $30,000 over 8 years = 50% total, about 5.20%/yr annualized.
• Fast gain, short hold: $5,000 to $6,500 over 1.5 years = 30% total, about 19.1%/yr annualized: high, but short and not guaranteed to repeat.
• A loss: $15,000 to $12,000 over 3 years = −20% total, about −7.17%/yr annualized.

Notice how the same 50% gain would look very different over 2 years versus 20, which is exactly why annualizing matters.

$10,000 rate of return over 5 years: quick reference

A common question is "what return did my $10,000 earn?" This table shows the total and annualized return for a $10,000 investment held 5 years with no separate income, across a range of final values.

To read it for a different initial amount, scale the final value by the same factor; the percentage returns are identical. A $50,000 stake growing to $80,000 in 5 years is the same 60% total, 9.86%/yr as the $10,000-to-$16,000 row.

What drives your rate of return

• Holding period: the longer you hold for the same total gain, the lower the annualized rate.
• Income (yield): dividends and interest add to total return and compound when reinvested.
• Cost basis: buying at a lower initial price raises every return figure.
• Fees and taxes: they are not in the gross formula but quietly reduce what you actually keep.
• Inflation: a 9.86% nominal return is worth less in real terms once you subtract inflation.

Tips for an accurate result

• Use your true cost basis as the initial value, including any purchase commissions.
• Include reinvested dividends in the final value, or enter income separately, but do not double-count.
• For a real (after-inflation) return, subtract the period's inflation rate from the annualized figure.
• If you added or withdrew money mid-period, CAGR is only an approximation; a money-weighted return (IRR or XIRR) is more precise.

Limitations and assumptions

This is a planning estimate, not a brokerage statement. Keep these assumptions in mind:

• It is a time-weighted CAGR based on a single start and end value; it does not model mid-period contributions or withdrawals.
• It shows gross returns: taxes, commissions and fund expenses are not deducted.
• Returns are nominal, not adjusted for inflation.
• Annualizing a very short period assumes the same rate continues for a full year, which can overstate volatile holdings.
• Past performance does not predict future results.

A second worked example: an income-heavy holding

Annualized return matters most when income is a big part of the story. Say you bought a rental property or a dividend stock for $50,000, it is now worth $58,000 after 4 years, and over that time it paid you $8,000 in rent or dividends. The price-only return is just (58,000 − 50,000) ÷ 50,000 = 16%, but adding the income lifts the total return to (58,000 − 50,000 + 8,000) ÷ 50,000 = 32%. Annualized, that is 1.32^(1/4) − 1 = about 7.2% per year, roughly double the price-only annualized figure of 3.8%. Ignoring the income would have made a perfectly decent investment look mediocre, which is exactly why the income field exists.

At the 7.19%/yr total-return rate, the $50,000 traces a smooth path of about $53,594 (year 1), $57,446 (year 2), $61,574 (year 3) and $66,000 (year 4), the same ending value the calculator shows.

Annualized return vs. average return

People often confuse the annualized return (CAGR) with a simple average of yearly returns, but they are not the same, and the difference grows with volatility. Imagine an investment that gains 50% one year and loses 50% the next. The simple average is (50% − 50%) ÷ 2 = 0%, which sounds like you broke even. In reality, $100 grows to $150, then falls to $75: a 25% loss over two years, or about −13.4% annualized. CAGR captures that real, compounded experience; the arithmetic average overstates it. This gap is called volatility drag, and it is why the annualized figure this calculator reports is the honest number for judging how an investment actually treated your money.

Nominal vs. real (after-inflation) return

The return this tool reports is nominal: it measures dollars, not purchasing power. To get your real return, take inflation out. The White House Office of Management and Budget describes both methods in Circular A-94: subtracting the inflation rate from the nominal rate gives an approximation, and dividing (1 + nominal) by (1 + inflation) and subtracting 1 gives the precise figure. If your investment annualized at 9.86% while inflation ran 3%, your real return was 1.0986 ÷ 1.03 − 1 = about 6.66% per year, the gain in what your money can actually buy. Over decades the difference is large: a "good" nominal return during a high-inflation stretch can be a flat or even negative real return. Inflation figures for any period come from the Bureau of Labor Statistics Consumer Price Index.

How to judge whether your return is good

There is no single "correct" rate of return; it depends on the asset and the risk you took. Instead of a rule-of-thumb average, compare your annualized figure with sourced benchmarks for the same period:

• Treasury yields: the Federal Reserve's H.15 release lists daily yields on Treasury securities, the usual low-risk yardstick. On October 8, 2026, the 3-month Treasury yielded 4.23% and the 10-year 5.22%. A riskier holding should have earned more than a Treasury of similar length to justify its risk.
• Inflation: the Federal Reserve's long-run inflation goal is 2% a year, and the Bureau of Labor Statistics publishes the actual Consumer Price Index. A return below inflation lost buying power.
• A comparable fund: run a fund that holds similar assets through this calculator for the same dates, using its total return with distributions reinvested, and compare the two annualized figures.
• Real estate: include rent in the income field so appreciation and rental yield are both counted; leverage changes the picture, which the Rental Property Calculator models.

If your calculated annualized return is far above comparable benchmarks, double-check your inputs, especially the holding period and whether you double-counted income. Higher expected return comes paired with higher risk, and past performance does not predict future results.

CAGR vs. money-weighted return (IRR)

This calculator reports a time-weighted CAGR, which uses a single starting value and a single ending value and is the right tool for judging an investment's performance independent of when you added cash. If you made multiple deposits or withdrawals at different times, what you actually earned on your own money is better captured by a money-weighted return, also called the internal rate of return (IRR). The two can differ a lot: if you happened to add a large amount right before a strong run, your money-weighted return will beat the time-weighted CAGR, and vice versa. For a clean single-purchase holding, CAGR and IRR are the same. When you have irregular cash flows, treat the CAGR here as an approximation and use the IRR Calculator for yearly cash flows or the XIRR Calculator for exact dates. To model steady future contributions instead, the Investment Calculator projects the path forward.

How it compares to related calculators

This page answers "what return did this investment earn, per year?" For related questions, a sister tool fits better:

• For a pure per-year growth rate from a start and end value, the CAGR Calculator is the focused version of this tool.
• To project growth forward with regular contributions, use the Investment Calculator.
• For a simple gain-versus-cost ratio, use the ROI Calculator.
• To see how compounding builds a balance over time, use the Compound Interest Calculator.
• To find what a sum will be worth later, use the Future Value Calculator; to check your nest egg, use the Retirement Calculator.

Sources

• U.S. Securities and Exchange Commission (Investor.gov): Compound Interest Calculator (how compounding works).
• U.S. Securities and Exchange Commission (Investor.gov): Stocks FAQs (dividends, price changes and risk).
• Office of Management and Budget: Circular A-94 (October 29, 1992, reinstated April 2025), Appendix A: nominal and real interest rates.
• Federal Reserve: H.15 Selected Interest Rates (Treasury yields for October 8, 2026, released October 9, 2026) and why the Federal Reserve aims for 2% inflation.
• U.S. Bureau of Labor Statistics: Consumer Price Index (CPI), for adjusting nominal returns to real returns.