Yearly Return On Investment Calculator

Yearly Return Formula:

\[ \text{Yearly ROR} = \left( \left( \frac{\text{End Value}}{\text{Start Value}} \right)^{\frac{1}{\text{Years}}} - 1 \right) \times 100 \]

Yearly Rate of Return:

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1. What is Yearly Rate of Return?

The Yearly Rate of Return (ROR) measures the annual percentage gain or loss on an investment over a specified time period. It helps investors compare the performance of different investments and assess whether they're meeting financial goals.

2. How Does the Calculator Work?

The calculator uses the compound annual growth rate (CAGR) formula:

\[ \text{Yearly ROR} = \left( \left( \frac{\text{End Value}}{\text{Start Value}} \right)^{\frac{1}{\text{Years}}} - 1 \right) \times 100 \]

Where:

\( \text{End Value} \) — Current or final investment value
\( \text{Start Value} \) — Initial investment amount
\( \text{Years} \) — Investment period in years

Explanation: The formula calculates the constant annual rate that would be required for the investment to grow from the start value to the end value over the investment period.

3. Importance of ROI Calculation

Details: Calculating yearly return helps investors evaluate investment performance, compare different investment options, and make informed decisions about portfolio allocation and financial planning.

4. Using the Calculator

Tips: Enter the initial investment amount, current value, and number of years the money was invested. All values must be positive numbers (years can be fractions for periods less than one year).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound return?
A: Simple return divides total return by years, while compound return accounts for the effect of reinvestment and compounding over time.

Q2: What is a good yearly return?
A: This depends on the asset class. Historically, stocks average 7-10%, bonds 3-5%, but returns vary by market conditions and risk level.

Q3: Can the return be negative?
A: Yes, if the end value is less than the start value, the return will be negative, indicating a loss.

Q4: How does inflation affect the return?
A: For real (inflation-adjusted) returns, you'd need to subtract the inflation rate from the nominal return.

Q5: Should I include additional contributions?
A: This calculator assumes a single initial investment. For multiple contributions, consider using an IRR (Internal Rate of Return) calculator.