A portfolio rarely goes up in a straight line. One year the S&P 500 climbs 25%, the next it drops 15%, the year after that it recovers 12%. If you only look at the start and end values, you miss the road in between — and you can't answer the question every investor actually cares about: what annualized growth rate did my holdings actually deliver through that cycle?
This portfolio return calculator takes your starting balance and the actual percentage return you earned each year, compounds them year by year, and reports the final value, the total dollar gain, the total return, and the annualized compound growth rate (CAGR). It is the same math a mutual fund prospectus uses when it shows a "1-year / 5-year / 10-year average annual total return."
How to Use
- Enter the Initial Portfolio Value — what your account was worth on day one of Year 1. Use the total balance across all holdings, not just your contribution.
- Set the Number of Years you want to model — 3, 4, or 5. The calculator only compounds the return fields you actually fill in.
- Type each year's total return as a percentage. This includes price change plus dividends and interest reinvested. A great year for stocks might be +20%; a down year is a negative number, such as −15%.
- Leave Year 4 and Year 5 at 0 if your holding period is shorter than five years; they are only used when you select them in the Number of Years field.
- Read the result card: Final Portfolio Value is what your starting balance grew into, Total Return is the cumulative gain or loss, and CAGR smooths the path into a single annualized rate.
- Compare the Best Year, Worst Year, and Profitable Years lines to see how volatile — and how consistent — the path was. A 10% CAGR that includes a −30% drawdown is a very different experience from a steady 10%.
The compounding engine multiplies, rather than adds, each year's return. That single distinction is why a +20% year followed by a −20% year nets you −4%, not 0% — losses hurt more than equivalent gains help, because they apply to a smaller balance.
Why a Year-by-Year Stream Beats a Single Average
Many investors average their annual returns arithmetically and walk away with the wrong answer. Consider three years: +15%, −5%, and +10%. The simple arithmetic average is (15 − 5 + 10) / 3 = 6.67%. But the true compound growth rate is lower, because the −5% loss applies to a smaller balance after the +15% gain, and the +10% recovery applies to the lower post-loss balance.
Plugging $100,000 into this calculator: after Year 1 you have $115,000. After the −5% Year 2 you are at $109,250. After the +10% Year 3 you finish at $120,175. That is a total return of 20.18% over three years, or a CAGR of about 6.32% — not the 6.67% arithmetic average. The gap between the two numbers is the volatility drag, and it grows the wider your swings are. A strategy that swings +40% / −20% / +30% has an arithmetic average of 16.7% but a CAGR closer to 14%, because the −20% year does disproportionate damage.
This is also why the order of returns matters for dollar outcomes during retirement: a −30% bear market in Year 1 of withdrawals is far more damaging than the same bear market in Year 10, even though the CAGR over the full window is identical.
Time-Weighted vs Money-Weighted Returns
This calculator reports a time-weighted return: it asks "if I had put a single lump sum in at the start and never touched it, how would it have compounded?" It ignores every contribution and withdrawal you made along the way. That is the right number to use when you want to judge how well the investments themselves performed, because cash flows in and out would otherwise distort the result.
If you instead want to judge your own investing decisions — including when you added or removed money — you need a money-weighted return, which is essentially an internal rate of return (IRR) that treats each deposit and withdrawal as a cash flow. The two numbers can differ by several percentage points a year if you made a large contribution right before a great quarter, or pulled money out right before a crash. For comparing managers or comparing your portfolio to the S&P 500 benchmark, use the time-weighted number this page produces.
Examples
Example 1 — The classic 3-year cycle. Start with $100,000. Year 1 is a bull market at +15%, Year 2 is a correction at −5%, Year 3 recovers at +10%. The calculator compounds to $120,175, a total return of +20.18% and a CAGR of 6.32%. Notice that even though two of three years were positive, the CAGR is below the arithmetic average of 6.67% — the −5% year shaved a little off the compound path.
Example 2 — A 5-figure portfolio through a bear market. $50,000 invested at the start of 2021 goes through: Year 1 +28%, Year 2 −19%, Year 3 +9%, Year 4 +18%, Year 5 +11%. The compounded final value is roughly $79,400, a total gain of about $29,400 and a CAGR near 9.6% — despite one losing year. A newcomer who looked only at the −19% year might have sold at the bottom; the annualized view shows the five-year outcome was still strong.
Example 3 — A seven-figure stress test. Start with $1,000,000 and earn +10%, +10%, +10% over three years. The balance compounds to $1,331,000 — a $331,000 gain and a CAGR of exactly 10.0%. At scale, a single percentage point of extra annual return is worth tens of thousands of dollars, which is why low-cost index funds and fee discipline matter so much for large portfolios.
Example 4 — A flat but choppy path. $200,000 goes +25%, −20%, +25%, −20%. The arithmetic average is 2.5% per year, but the compounded result is $200,000 × 1.25 × 0.80 × 1.25 × 0.80 = $200,000 — a 0% total return. Up 25% then down 20% brings you back exactly to even, and repeating the pattern leaves you no wealthier at all. This is the clearest possible illustration of why avoiding big drawdowns is so powerful.
FAQ
What is a good portfolio return over 5 years?
Over long horizons, a diversified U.S. stock portfolio has produced roughly a 10% annualized nominal return (about 7% after inflation). A 5-year CAGR between 7% and 10% for an equity-heavy portfolio is solid; below 5% likely means too much cash or bonds, and above 15% sustained over a full cycle is exceptional and probably concentrated in a hot sector. Compare your number to a benchmark like the S&P 500 over the exact same years, because market conditions in your window matter more than any single percentage.
What is the difference between total return and CAGR?
Total return is the entire percentage change from start to finish, including all up and down years, over the whole holding period. CAGR (Compound Annual Growth Rate) converts that total return into a smoothed annualized rate, as if the portfolio had grown at a constant pace every year. A 20.18% total return over 3 years is a 6.32% CAGR. Total return answers "how much did I make?"; CAGR answers "what steady yearly rate would have produced the same result?"
Why is my CAGR lower than the average of my yearly returns?
Because compounding is multiplicative, not additive. A −10% loss requires an +11.1% gain just to break even, and a −50% loss requires a +100% gain. The more volatile your yearly returns, the wider the gap between the simple arithmetic average and the true CAGR. That gap is called volatility drag, and it is one of the strongest arguments for diversification and drawdown control.
Does this calculator include dividends?
It depends on what you type into the year fields. If your yearly return is the total return — price change plus all dividends and interest reinvested — then yes, they are included. If you only enter price appreciation (excluding dividends), the result will understate your real return by roughly 1.5–2% per year for a broad U.S. stock portfolio, because dividends have historically contributed about a third of long-run equity returns.
How do I handle a negative return year?
Enter it as a negative number, for example -15 for a 15% loss. The calculator multiplies the balance by (1 - 0.15) = 0.85, which correctly shrinks the portfolio. A −100% year would wipe out the entire balance; any return below −100% is not economically possible for a long-only portfolio and is rejected by the engine.
Should I use this calculator or an IRR calculator if I added money mid-year?
Use an IRR (money-weighted) calculator. This page computes a time-weighted return from a single starting lump sum, which is the right number for judging investment performance against a benchmark. If you contributed or withdrew money at different points, those cash flows distort the time-weighted figure; an IRR tool accounts for the timing and size of each deposit and withdrawal.
Is this the same as the return my broker shows?
Most brokers report a time-weighted personal performance number, which should match what this calculator produces if you enter the same yearly returns. However, brokers often subtract fees and expense ratios, and some use a daily or monthly valuation rather than annual snapshots, so expect small rounding differences. The CAGR to the second decimal may differ slightly, but the total return and final value should be within a fraction of a percent.
Disclaimer
This portfolio return calculator is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice. Results are based entirely on the yearly return percentages you enter and the standard compound-growth formula; they do not account for fees, taxes, transaction costs, inflation, future market movements, or the timing of contributions and withdrawals. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions based on projected or historical returns.