The basic formula: what you have now minus what you started with

Investment return is the money you made (or lost) on an investment. The simplest way to calculate it is: take what your investment is worth today, subtract what you put in, and divide by what you put in. That gives you your return as a decimal, which you can turn into a percentage by multiplying by 100.

Here is the formula written out: (Current Value − Initial Investment) ÷ Initial Investment × 100 = Return %

If you invested $1,000 in a stock and it is now worth $1,200, your return is ($1,200 − $1,000) ÷ $1,000 × 100 = 20%. You made 20% on your money.

This basic calculation works for any single investment you hold for any length of time. But the real world is messier — you might add money along the way, take money out, or hold the investment for years. Those situations need different approaches.

Key Takeaways

  • Simple return is (Current Value − Initial Investment) ÷ Initial Investment × 100, and works when you invest a lump sum and do not add or withdraw money.
  • Annualized return divides your total return by the number of years you held the investment, so you can compare investments you held for different lengths of time.
  • When you add or withdraw money during the holding period, you need to use dollar-weighted return (also called internal rate of return) to see what you actually earned.
  • Total return includes dividends and interest reinvested, not just the change in price.
  • Most brokerage statements calculate returns for you, but understanding the math helps you spot errors and compare investments fairly.

Simple return versus annualized return

Simple return tells you the total percentage gain or loss from start to finish, but it does not account for time. If you made 20% over one year, that is very different from making 20% over ten years — but the simple return number is the same either way.

Annualized return fixes this by spreading your total return across the years you held the investment. The formula is: (Total Return ÷ Number of Years) = Annualized Return. If you made 20% over five years, your annualized return is 20 ÷ 5 = 4% per year on average.

Annualized return is more useful when you compare two investments you held for different lengths of time. A stock that returned 15% over three years (5% annualized) beat a bond that returned 12% over two years (6% annualized) — but you would not know that from the simple numbers alone.

What to do when you add or withdraw money

If you invested $1,000, then added $500 six months later, and now have $1,800, you cannot just use the simple formula. The second $500 did not have as much time to grow, so it should not count the same way as the first $1,000.

Dollar-weighted return (also called internal rate of return, or IRR) accounts for the timing and size of each deposit and withdrawal. It answers the question: "What annual growth rate would turn my actual deposits into my actual balance?" This is harder to calculate by hand, but most brokerage platforms do it for you.

To calculate it yourself, you would need a financial calculator or spreadsheet software that has an IRR function. You list each deposit as a negative number (money out of your pocket) and your current balance as a positive number, with dates for each. The IRR function then solves for the rate that makes the math work.

If you do not have access to that tool, your brokerage statement usually shows dollar-weighted return under names like "Internal Rate of Return" or "Money-Weighted Return." That number is more accurate than simple return when your deposits or withdrawals were uneven.

Including dividends and interest in your calculation

If your investment paid dividends or interest, you need to decide whether to count that money as part of your return. Total return includes dividends and interest that were reinvested (automatically bought more shares) or paid out to you. Price return counts only the change in the investment's price, not the income it generated.

Most of the time, you want total return, because it shows what you actually earned. If a stock went from $100 to $110 but paid $5 in dividends, your total return is ($110 + $5 − $100) ÷ $100 = 15%, not 10%.

If the dividends were paid to you in cash rather than reinvested, add them to your current value before you calculate. If they were reinvested automatically, your current value already includes them, so the formula works as written.

How to handle taxes and fees

The calculations above show your gross return — what you earned before taxes and fees. Your net return is what you keep after paying both.

To calculate net return, subtract the fees and taxes you paid from your current value before you do the math. If you earned $200 but paid $30 in fees and $40 in taxes, your net gain is $200 − $30 − $40 = $130. Then divide that by your initial investment as usual.

Taxes are tricky because they depend on how long you held the investment, your income level, and where you live. Your brokerage will send you a tax document (Form 1099) at the end of the year showing your gains. For now, just know that your actual take-home return will be lower than what your brokerage statement shows.

What your brokerage statement actually shows

Most brokerages calculate returns for you and display them on your account page. They usually show several versions: return since you opened the account, return for the current year, and return for the last one, three, five, or ten years.

Read the fine print to see which kind of return they are showing. Some show price return only (not counting dividends). Some show gross return (before fees). Some show returns for a specific time period that may not match the time you actually held the investment.

The most useful number on your statement is usually the one labeled "Total Return" or "Performance" for the time period that matches how long you have actually owned the investment. If you bought in January 2022 and it is now March 2024, look for the return since January 2022, not the year-to-date return.

Comparing returns across different investments

To compare two investments fairly, use annualized return if you held them for different lengths of time. A mutual fund that returned 30% over five years (6% annualized) is not as strong as a bond that returned 12% over one year (12% annualized).

Also make sure you are comparing the same type of return. If one investment shows price return and another shows total return, the comparison is not fair. Check whether fees are already subtracted. Check whether the time periods are the same.

One more thing: past return does not predict future return. An investment that earned 10% last year might earn 2% next year or lose 5%. Return calculations show what happened, not what will happen.

Frequently Asked Questions

What is the difference between return and yield?

Return is the total percentage gain or loss on your investment from start to finish. Yield is the annual income (dividends or interest) an investment generates, shown as a percentage of its current price. A bond might have a 4% yield but a 6% total return if its price also went up.

How do I calculate return if I bought at different prices?

If you bought 10 shares at $50 and 10 shares at $60, your average cost per share is ($500 + $600) ÷ 20 = $55. Use that average as your initial investment in the formula. If you now have 20 shares worth $70 each, your return is ($1,400 − $1,100) ÷ $1,100 = 27%.

Why does my brokerage show a different return than I calculated?

They might be using dollar-weighted return instead of simple return, or they might be showing price return instead of total return. They might also be excluding fees or showing a different time period than you expected. Check the fine print on your statement to see which calculation they used.

Can return be negative?

Yes. If you invested $1,000 and it is now worth $800, your return is ($800 − $1,000) ÷ $1,000 = −20%. You lost 20% of your money. Negative returns happen when an investment's price falls or when fees and taxes exceed any gains.