Portfolio Return Calculator
Use this calculator to determine the absolute and annualized returns of your investment portfolio, taking into account initial investments, contributions, withdrawals, and the final portfolio value over a specified period.
Understanding Your Portfolio's Performance
Measuring the performance of your investment portfolio is crucial for assessing your financial progress and making informed decisions. This Portfolio Return Calculator helps you understand two key metrics: Absolute Return and Annualized Return.
What is Portfolio Return?
Portfolio return refers to the gain or loss generated by your investments over a specific period. It's not just about the final value, but how that value compares to the total capital you've put in and taken out over time.
Key Metrics Explained:
- Initial Investment: This is the amount of money you initially put into your portfolio at the very beginning of the investment period.
- Total Contributions: These are any additional funds you've added to your portfolio after the initial investment, throughout the investment period.
- Total Withdrawals: These are any funds you've taken out of your portfolio during the investment period.
- Final Portfolio Value: This is the total market value of your portfolio at the end of the investment period.
- Investment Period (Years): The duration, in years, over which you are measuring the portfolio's performance.
Calculated Results:
- Total Gain/Loss: This is the absolute dollar amount your portfolio has gained or lost. It's calculated as:
Final Portfolio Value - (Initial Investment + Total Contributions - Total Withdrawals). A positive number indicates a gain, while a negative number indicates a loss. - Absolute Return: This metric shows the total percentage return your portfolio has generated over the entire investment period. It's calculated by dividing the Total Gain/Loss by the Net Investment (Initial Investment + Total Contributions – Total Withdrawals). It tells you how much your capital has grown or shrunk in percentage terms from the effective capital you've put in.
- Annualized Return (CAGR-like): Also known as the Compound Annual Growth Rate (CAGR) approximation, this metric provides the average annual rate of return over the investment period, assuming the returns were compounded. It helps you compare the performance of investments over different timeframes. This calculation assumes a consistent growth rate and is an approximation when contributions and withdrawals occur, as a true CAGR typically applies to a single initial investment without cash flows. If the net investment is negative or the calculation results in a negative base for exponentiation, the annualized return may be undefined.
Example Scenario:
Let's say you started with an Initial Investment of $10,000. Over 3 years, you made Total Contributions of $5,000 and took out Total Withdrawals of $1,000. At the end of the 3 years, your Final Portfolio Value is $18,000.
- Net Investment: $10,000 (Initial) + $5,000 (Contributions) – $1,000 (Withdrawals) = $14,000
- Total Gain/Loss: $18,000 (Final Value) – $14,000 (Net Investment) = $4,000
- Absolute Return: ($4,000 / $14,000) * 100% = 28.57%
- Annualized Return (CAGR-like): ((($18,000 / $14,000)^(1/3)) – 1) * 100% = 6.69%
This means your portfolio grew by $4,000 in total, representing an absolute return of 28.57% over three years, which annualizes to approximately 6.69% per year.
Why These Metrics Matter:
Understanding both absolute and annualized returns gives you a comprehensive view of your portfolio's health. Absolute return shows the overall impact, while annualized return allows for comparison with other investments or benchmarks, regardless of their investment duration. Regularly tracking these metrics helps you evaluate your investment strategy and make adjustments as needed.