Investment return is profit divided by the amount invested: growing €10,000 into €15,000 is a 50% total return. Over 5 years that is an annualised return (CAGR) of 8.45%, calculated as (15,000 ÷ 10,000)^(1/5) − 1. After 2% inflation the real return is about 6.3% a year.
How do you calculate investment return?
Total return is the gain divided by what you put in: (end value + income received − start value) ÷ start value. A 50% total return over five years does not tell you what you earned per year, though. For that use the annualised return, also called CAGR (compound annual growth rate): (end value ÷ start value)1/years − 1. It is the constant yearly growth rate that would turn the starting amount into the end value. Dividing 50% by five years and calling it 10% a year overstates the result because it ignores compounding. In Dutch this is called rendement berekenen, and the method is the same.
Including dividends and interest
Many investments pay income as well as price growth. Add the income you received to the end value, as the field above does, otherwise you understate performance. If you added money or took it out during the holding period, this simple formula no longer applies and you need a money-weighted return (IRR). A rough alternative is to use your average invested amount.
Nominal and real return
An 8.45% annual return sounds great, but with 2% inflation your purchasing power grew by only about 6.3% a year: (1.0845 ÷ 1.02) − 1. That real return is what you actually gained. Taxes matter too. In the Netherlands private investors do not pay tax on the actual return but on a deemed return in box 3, so see the Box 3 Calculator to estimate that cost.
What is a good return?
| Investment type | Long-run average (indication) |
|---|---|
| Savings account | Around or below inflation |
| Government and corporate bonds | 2% to 4% a year |
| Global equities | 5% to 8% a year, with large swings |
| Property | Depends heavily on location |
These are historical indications, not forecasts. To project what a given return could grow into, use the Investment Calculator or the Compound Interest Calculator. For income from shares, see the Dividend Calculator.
Investment return: three worked examples
Equity fund. You invested €8,000 and it is worth €11,200 after 4 years. The total return is 40% and the annualised return is (11,200 ÷ 8,000)^(1/4) − 1 = 8.8% a year.
Savings with interest. €20,000 grows to €21,236 in 3 years. That is 6.2% in total and 2.0% a year. If inflation is 2.5% a year, the real return is negative: you lose purchasing power even though the balance is higher.
Property. A home bought for €300,000 is worth €390,000 after 6 years: 30% in total and 4.5% a year. Purchase costs, maintenance and mortgage interest reduce that, so for property it is better to also look at the return on your own money, for example with the Rent vs Buy Calculator.
Compare the period carefully: a 20% gain in two years is a much lower annual return (9.5%) than 20% in one year.
How to use this calculator
- Enter the starting value and the end value of your investment.
- Enter the holding period in years. Decimals such as 2.5 are fine.
- Add any dividends or interest you received along the way.
- Press Calculate to see total return, annualised return and the return after inflation.
Key figures at a glance
| Total return | (end + income − start) ÷ start |
|---|---|
| Annualised return (CAGR) | (end ÷ start)^(1/years) − 1 |
| Real return | (1 + nominal) ÷ (1 + inflation) − 1 |
Frequently asked questions
Divide the profit by the starting value and multiply by 100. Going from €10,000 to €12,000 is a 20% return.
Total return covers the whole period. The annual return (CAGR) is the average compounded percentage per year.
Add all dividends and interest you received to the end value before you calculate the return.
Compound annual growth rate, the smoothed yearly growth rate between a start value and an end value.
No. For investments with deposits or withdrawals you need a money-weighted or time-weighted return.