How to calculate rate of return
Rate of return = (ending value − starting value + income received) ÷ starting value. Buy for $10,000, end with $12,000 plus $600 in dividends, and your return is 26%. To compare investments held for different lengths of time, turn that into a yearly rate (CAGR): 26% over 3 years is 8.01% a year.
Updated October 20, 2026 · 8 min read · Plain math, no product pitches
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How do you calculate rate of return?
Subtract what you started with from what you ended with, add any income you received, and divide by what you started with. That is your rate of return: how much your money grew, as a percentage of the money you put in.
- V₁
- ending value, or what you sold for
- V₀
- starting value, what you paid
- D
- income received along the way: dividends, interest, rent
Multiply by 100 to get a percentage. The top line on its own, V1 − V0 + D, is your return in dollars. Both matter: a $500 gain is great on $1,000 and tiny on $100,000, and the percentage is what lets you compare the two. That one formula, with small changes, covers most of what people mean by return, ROI and holding period return. The only big extension is time: a 26% return over three years is not the same as 26% in one year, so the second half of this guide turns totals into yearly rates.
Total return: include dividends and interest
Total return is the price change plus the income an investment paid you. Leaving the income out gives the price return, which understates what you actually earned.
Historical stock market figures are quoted as total returns for this reason. The S&P 500 numbers used on this site include dividends, before taxes and fees.
Rate of return calculator
Enter what you paid, what it is worth now (or what you sold it for), any income it paid you, and how long you held it. You get the gain, the total return and the yearly rate (CAGR), with the formulas filled in.
Rate of return calculator
Total return including income, and the steady yearly rate (CAGR).
Gain
$7,300
Total return
73.0%
Over the whole time
Per year (CAGR)
11.59%
The steady yearly rate
Total return = ($16,500 + $800 − $10,000) ÷ $10,000 = 73.00%
CAGR = ($17,300 ÷ $10,000)1/5 − 1 = 11.59%
With the starting numbers ($10,000 grown to $16,500 plus $800 of income over 5 years), the total return is 73% and the yearly rate is 11.59%.
How to calculate ROI
ROI, return on investment, is the net gain divided by the full cost. It is the same idea as rate of return, used for any spending decision, and it should include every cost: commissions, fees and anything else you paid to make the investment.
- Gain
- what you got back, including income
- Cost
- everything you paid, including fees
ROI has no time in it. An 18% ROI over one year is excellent; over ten years it is about 1.7% a year. Before comparing two ROIs, check the time each took.
Holding period return
Holding period return (HPR) is the total return for the whole time you held something, whatever its length. Textbooks often write it per share:
- P₀
- price you paid
- P₁
- price at the end
- D
- dividends or interest per share received while you held it
Holding period return over several years
If you know the return for each year, do not add them up. Multiply the growth factors (1 + each return) and subtract 1, because each year’s return applies to a balance that already changed.
Annualized return and CAGR
The annualized return is the steady yearly rate that would turn your starting value into your ending value over the same time. For a single investment, it is the same thing as the CAGR, the compound annual growth rate.
- V₁
- ending value, including income
- V₀
- starting value
- t
- years held (18 months = 1.5)
Monthly and yearly rates
The same idea converts between monthly and yearly rates. A yearly rate is (1 + monthly rate)12 − 1, so 1% a month is 1.0112 − 1 = 12.68% a year, not 12%. Going the other way, the monthly rate is (1 + yearly rate)1/12 − 1, so 8.76% a year is 0.70% a month.
Here is what a total return works out to per year, depending on how long it took:
| Total return | Over 3 years | 5 years | 10 years | 20 years | 30 years |
|---|---|---|---|---|---|
| +25% | 7.72% | 4.56% | 2.26% | 1.12% | 0.75% |
| +50% | 14.47% | 8.45% | 4.14% | 2.05% | 1.36% |
| +100% (doubled) | 25.99% | 14.87% | 7.18% | 3.53% | 2.34% |
| +200% (tripled) | 44.22% | 24.57% | 11.61% | 5.65% | 3.73% |
A doubling sounds impressive. Over 20 years it is only 3.53% a year, barely ahead of 3% inflation. Always ask “over how long?”
Average return vs annualized return →Why averaging yearly returns overstates growth, with the S&P 500 as the example.How to calculate rate of return in Excel or Google Sheets
The cleanest way is the RRI function, which exists in both Excel and Google Sheets and returns the CAGR directly.
=RRI(7, 10000, 18000)returns 0.0876, or 8.76% a year. RRI takes the number of periods, the starting value and the ending value.=RRI(3, 10000, 12600)returns 0.0801 for the fund example above (8.01% a year). Add income to the ending value first.- The same thing by hand:
=(18000/10000)^(1/7)-1. - Total return:
=(B2-B1+B3)/B1with the start in B1, the end in B2 and income in B3. Format the cell as a percentage.
If you added or withdrew money along the way, RRI gives the wrong answer. Use XIRR with the date and amount of every deposit; the guide on time-weighted and money-weighted returns walks through it.
Why annualizing a short holding period misleads
Because it assumes the same pace continues for a full year, and short stretches almost never keep their pace. Annualizing a few good weeks produces numbers no investment sustains.
| What happened | Annualized, it becomes |
|---|---|
| +3% in one month | +42.58% a year |
| +5% in two months | +34.01% a year |
| +20% in six months | +44.00% a year |
| −4% in one month | −38.73% a year |
Negative returns and getting back to even
A loss needs a bigger gain to recover, because the gain starts from a smaller balance. A 20% loss needs a 25% gain to get back to even, and a 50% loss needs a 100% gain.
| Loss | Gain needed to recover |
|---|---|
| −20% | +25.00% |
| −30% | +42.86% |
| −50% | +100.00% |
The formulas work the same with a loss. $10,000 that is worth $8,000 after 4 years is a −20% total return, and a CAGR of (8,000 ÷ 10,000)1/4 − 1 = −5.43% a year.
How to calculate the return on your whole portfolio
If you did not add or take out money, it is simply the whole portfolio’s gain divided by its starting value. That equals a weighted average of each holding’s return, weighted by how much money each one started with.
Most people add money every month, which breaks this simple math: a new deposit raises the ending balance without being a gain. For that, you need a return that accounts for the timing of each deposit.
How to calculate your return when you keep adding money →Time-weighted vs money-weighted return, XIRR step by step, and a calculator for deposits.What is the difference between return and yield?
Yield is only the income an investment pays, as a percentage of its price: a dividend yield, an interest yield. Return is income plus the change in price. A high yield can come with a negative return.
It works the other way for growth investments. A stock fund with a 1.5% dividend yield whose price rises 8% returned 9.5%. Judging it by its yield would miss most of the return.
Two more terms to keep apart: a savings account’s APY is its yield and, since the balance doesn’t change in price, also its return. And none of these numbers is adjusted for inflation unless it says “real.”
Real rate of return: after inflation →What your return is worth once prices have gone up, with a calculator.Which rate of return formula should you use?
Pick by what you know and what you want to compare. Every formula here gives a decimal; multiply by 100 for a percentage.
| You want | Formula | Spreadsheet |
|---|---|---|
| The total gain on one investment | (V1 − V0 + D) ÷ V0 | =(B2-B1+B3)/B1 |
| The gain after every cost | (Gain − Cost) ÷ Cost | =(B2-B1)/B1, with fees in B1 |
| A yearly rate for one investment | (V1 ÷ V0)1/t − 1 | =RRI(t, V0, V1) |
| Several yearly returns combined | (1 + r1) × (1 + r2) × … − 1 | =PRODUCT(C2:C11)-1, with 1 + each return in column C |
| A yearly rate when you added or withdrew money | Money-weighted return (IRR) | =XIRR(amounts, dates) |
| The return after inflation | (1 + r) ÷ (1 + inflation) − 1 | =(1+B1)/(1+B2)-1 |
Common mistakes
- Leaving out dividends and interest. In the fund example, that turned a 26% return into 20%.
- Leaving out fees and commissions. They are part of what you paid. Yearly fund fees are already inside the fund’s price, but account and advice fees usually are not.
- Dividing a total return by the years. 80% over 7 years is 8.76% a year, not 11.43%. Use the CAGR formula or RRI.
- Annualizing a few weeks or months. It turns ordinary noise into a headline number.
- Counting deposits as gains. If you added $6,000 during the year, your balance going up $6,000 is not a return. Use XIRR.
- Comparing a yield with a return. A 4% yield and a 9.5% return are measuring different things.
- Forgetting the time. A return with no time period attached cannot be compared with anything.
Questions people ask
Is ROI the same as rate of return?
Nearly. Both are gain ÷ cost. ROI is the term used for any spending decision, and it should count every cost, including fees. Rate of return is the investing term and usually means total return, often stated per year.
What is the difference between CAGR and average annual return?
CAGR is the one steady yearly rate that turns your starting value into your ending value. An average annual return is sometimes a simple average of each year's return, which comes out higher when returns bounce around: the S&P 500's simple average for 1928 to 2025 is 11.86%, but it compounded at 10.02%.
How do you calculate a monthly rate of return?
Divide the month's ending value (plus any income) by its starting value and subtract 1. To turn a monthly rate into a yearly one, use (1 + monthly rate)^12 − 1, so 1% a month is 12.68% a year, not 12%.
How do you calculate rate of return after inflation?
Real return = (1 + return) ÷ (1 + inflation) − 1. An 8.01% yearly return with 3% inflation is a real return of 4.86% a year, a little less than the 5.01% you get by subtracting.
How do you calculate the rate of return on a stock?
Take the current price (or your sale price) minus what you paid, add any dividends you received, and divide by what you paid. Include commissions in what you paid. Then annualize it if you held the stock for more or less than a year.
Can a rate of return be negative?
Yes. If you end with less than you started with, counting income, the return is negative. $10,000 that becomes $8,000 over 4 years is a −20% total return, or −5.43% a year.
How do I calculate my return if I added money during the year?
Simple start-and-end math breaks when you add or withdraw money, because the new money counts as a gain. Use a money-weighted return (XIRR in a spreadsheet) for how your money did, or a time-weighted return for how the investments did.
Should I use total return or price return?
Total return, which counts dividends and interest. Price return leaves out income, so it understates what you earned; the gap is largest for investments that pay a lot of income, such as bonds and high-dividend stocks.