# Investment Return Calculator > Calculate total return, annualized return, and growth of your investments over time **Category:** Finance **Keywords:** investment, return, roi, annualized return, cagr, total return, stock, portfolio, growth **URL:** https://complete.tools/investment-return-calculator ## Understanding total return and CAGR Total return measures the overall percentage gain or loss on an investment from start to finish. If you invested $10,000 and it grew to $15,000, your total return is 50%. While total return is straightforward, it does not account for how long it took to achieve that gain. That is where the Compound Annual Growth Rate (CAGR) comes in. CAGR calculates the equivalent constant annual rate that would take your initial investment to its final value over the given time period. The formula is CAGR = (Final Value / Initial Value)^(1/years) - 1. For instance, growing from $10,000 to $15,000 over 5 years gives a CAGR of approximately 8.45%. CAGR is especially useful for comparing investments held over different time periods, because it normalizes returns to a single annual figure. Keep in mind that CAGR assumes smooth growth and does not reflect the actual year-to-year volatility an investment may have experienced. ## How compound growth with contributions works When you make regular contributions to an investment account, your returns compound not only on your original principal but also on every contribution you make along the way. The future value formula used by this calculator is FV = PV * (1+r)^n + PMT * ((1+r)^n - 1) / r, where PV is the initial investment, r is the periodic (monthly) rate of return, n is the total number of periods, and PMT is the recurring monthly contribution. This formula assumes contributions are made at the end of each month and that returns compound monthly. The power of combining regular contributions with compound growth is dramatic. For example, investing $10,000 at 8% annual return for 20 years with $300 monthly contributions grows to roughly $224,000, even though you only contributed about $82,000 out of pocket. The remaining $142,000 comes entirely from investment returns compounding over time. This is why financial advisors emphasize starting early and contributing consistently, even if the amounts seem small. ## The role of dividend yield Dividends are periodic cash payments companies make to shareholders out of their profits. When you set a dividend yield in this calculator, the yield is added to the expected capital appreciation to compute the total annual return. For instance, if you expect 6% price growth and have a 2% dividend yield, the calculator uses an 8% total return. The tool also provides an estimate of total dividend income over the investment period, calculated as the average portfolio value multiplied by the yield and the number of years. In practice, dividends can be reinvested to purchase additional shares, which further accelerates compound growth. Many long-term investors choose dividend-paying stocks or funds precisely because reinvested dividends can account for a significant portion of total returns over decades. ## Worked examples Example 1 - Calculating past return: You purchased shares for $5,000 in 2018 and they are worth $9,200 in 2025 (7 years). Total Return = ($9,200 - $5,000) / $5,000 = 84%. CAGR = ($9,200 / $5,000)^(1/7) - 1 = approximately 9.1% per year. Your investment nearly doubled, growing at an annualized rate of about 9.1%. Example 2 - Projecting future growth: You plan to invest $10,000 today, contribute $300 per month, and expect an 8% annual return over 20 years with no dividend yield. Using the future value formula: FV = $10,000 * (1.00667)^240 + $300 * ((1.00667)^240 - 1) / 0.00667 = approximately $224,691. Of that, $82,000 represents your total contributions ($10,000 + $300 * 240), and roughly $142,691 is pure investment growth from compounding. Example 3 - Impact of dividends: Same scenario as Example 2, but with a 2% dividend yield (total return becomes 10%). FV = $10,000 * (1.00833)^240 + $300 * ((1.00833)^240 - 1) / 0.00833 = approximately $307,350. Adding just 2% in dividend yield increased the final value by over $82,000 compared to the no-dividend scenario, demonstrating the powerful effect of reinvested dividends compounding over a long horizon. ## Limitations and assumptions This calculator assumes a constant annual rate of return compounded monthly. Real-world investment returns are volatile and vary significantly from year to year. The sequence of returns matters, and poor returns early in the investment period can have a larger impact than poor returns later, especially when making regular contributions. The calculator does not account for taxes on capital gains or dividends, investment fees and expense ratios, inflation that erodes purchasing power over time, or the timing of contributions within each month. For a more comprehensive retirement projection, consider combining this tool with a tax calculator and an inflation-adjusted planning tool. ## FAQs **Q:** What is a good annual return to expect? **A:** The historical average annual return of the S&P 500 is approximately 10% before inflation (about 7% after inflation). However, returns vary significantly by decade, asset class, and geographic market. Conservative projections often use 6-8% for diversified stock portfolios. **Q:** What is the difference between CAGR and average return? **A:** CAGR is the geometric mean return that accounts for compounding. The arithmetic average simply adds yearly returns and divides by the number of years. CAGR is always less than or equal to the arithmetic average because of the mathematical effect of volatility drag. CAGR more accurately represents actual investor experience. **Q:** How does this differ from an ROI calculator? **A:** ROI (Return on Investment) typically refers to the total return percentage without considering time. This calculator provides both total return and the annualized version (CAGR), giving you a time-adjusted measure that is more useful for comparing investments held over different periods. **Q:** Should I include dividends in the expected return or separately? **A:** If your expected return figure already includes dividends (as most total return indices do), set the dividend yield to 0. Use the separate dividend yield field only when you want to see estimated dividend income broken out, or when your expected return figure represents price appreciation only. **Q:** Why does the growth multiplier matter? **A:** The growth multiplier tells you how many times your money grew. A 2x multiplier means your money doubled, 3x means tripled, and so on. It provides an intuitive sense of scale that percentages sometimes obscure, especially for large or long-duration investments. --- *Generated from [complete.tools/investment-return-calculator](https://complete.tools/investment-return-calculator)*