# Chapter 09: How to Calculate Your Return on Investment (ROI)

Save more, spend smarter, and make your money go further

So far in our investing series, we’ve covered a lot of important topics about investing, such as the different types of investments, the benefits of investing, how to invest in real estate, and more. These are all necessary topics that you need to know so that you can have a solid grasp of how investing works. And in this chapter, we’ll be discussing how to calculate ROI.

The goal of this chapter is to provide you with a basic understanding of how to calculate return on investment, or ROI. ROI is a metric that is used to evaluate the profitability of an investment. It’s a ratio that compares how much you paid for an investment versus how much you earned from it. Knowing how to calculate ROI is crucial so that you can understand the efficiency of your investments and make smarter financial decisions.

## Investment Calculator

Managing your money can be a challenging feat, especially when you have multiple sources of income to account for. Our investment calculator makes monitoring your investment income unintimidating, intuitive, and effective.

By entering a few key figures, you can create investment goals, forecast investment growth, and search for opportunities to boost your portfolio’s success!

Investment Calculator
First, tell us about your investment plan by filling in the fields below.
1Investment Plan:
Starting Amount:

Amount of initial investment: Total amount you will initially invest or currently have invested toward your investment goal.
Years to Accumulate:

Years to accumulate: The number of years you have to save.
Expected Rate of Return:

Expected rate of return on investment: This is the rate of return an individual would expect from their investment. It is important to remember that these scenarios are hypothetical and that future rates of return cant be predicted with certainty and actual rate of return can very widely over time.
Contribution Amount:

Periodic contribution: The amount you will contribute each period and the frequency at which you will make regular contributions to this investment.
* Figures are calculated at the end of the specified period
2Taxes:
Overall Effective Tax Rate:

Overall effective tax rate: Effective Tax Rate (ET)=Taxes Paid / Taxable Income. The effective tax rate is the average tax rate paid on all of an individuals income. If you do not know your Effective Tax Rate you can enter your Marginal Federal Tax Rate
Balance in Year 2020: \$0
Reset
\$0
Starting Amount
\$0
Total Contributions
\$0
Total Growth
Investment Growth Over Time

Investment Breakdown
.Starting Amount
.Total Contributions
.Total Growth

Available for iOS and Android

## How to Use the Investment Growth Calculator

Our investment growth calculator is simple to use and even easier to interpret. Here’s how:

1. Enter the Starting Amount of your investment
• This is the initial investment you made in this security. If you opened the investment with \$8,000, enter \$8,000 in the first box. If you started with \$100, enter \$100.
2. Indicate Years to Accumulate
• Years to accumulate is the amount of time you intend to hold onto your investment. Typically, investments that mature for longer become more valuable than those which are sold faster. Input the years you intend to hold onto your investment here.
3. Enter the Rate of Return on your investment
• Rate of return is the expected net gain or loss on an investment over time. Rate of return is calculated as a percentage. Here’s how to calculate the rate of return on your investment:
• Rate of return = [Current value of investment – Initial value of investment / Initial value] x 100
• Note: Your rate of return may fluctuate over time due to unpredictable factors like stock market changes, federal interest rates, and investment security. That said, using a 4% rate of return can give you a more accurate, safer result. Including a higher rate of return may create an overly positive view of your investment growth, without accounting for potential losses.
4. Fill in Contribution Amount
• If you contribute to this investment fund on a regular basis, you’ll want to enter how much you typically invest and how often here. Enter the average amount you contribute, then select one of these options from the dropdown menu: Annually, Semi-Annually, Monthly, Bi-Weekly, Weekly.

## Important Investing Terms to Know

A common investor mistake is not taking the time to educate yourself on important investment terms. Before you can actually begin your investing journey, there are various investing terms you need to know, such as:

Starting Balance: A starting balance is the amount that you initially invested when you purchased the investment. You might start by investing \$100 or \$1,000—no matter how big or small your investment, you can calculate its potential using our investment growth calculator.

Contributions: This is the amount of money you add to your investment over time. This amount will impact the growth of your investment and is a key metric featured in our investment calculator. If you contribute \$100 to your retirement fund each month, you would include this in the additional contributions field.

Rate of Return: How much you expect to profit on your investment, expressed in a percentage.

Years to Accumulate: The amount of time you expect to hold onto your investment before selling or otherwise withdrawing capital.

Liquidate: Selling your assets for cash or cash equivalents.

Liquidity: How easily or quickly an asset can be liquidated, or sold, for cash or cash equivalents.

Net Gain: The amount of money earned on an investment, not including the amount paid for the investment.

Net Loss: The amount of money lost on an investment.

Investment Budget: The amount of money you can afford and feel comfortable investing. Want to learn how to budget and boost your investable income? Mint helps you create personalized budgets designed to support your personal and financial goals.

Investment Portfolio: All of the investments you own: stocks, bonds, mutual funds, ETFs, retirement funds, etc. Generally, investors aim to have a mix of long-term and short-term investments in their portfolio in the hopes of reducing risk and maximizing returns. Check out our post on how to strengthen your investment portfolio to learn more.

## FAQs

### General investing FAQs

#### What are the different types of investments?

There are several types of investments to choose from, including:

• Stocks: Shares of company ownership traded on the stock market.
• Bonds: Loans that are financed by investors. They’re typically used by companies and government organizations.
• Mutual Funds: Investment funds that are financed by multiple investors; index funds are one example of mutual funds.
• Exchange-Traded Funds: Investment funds that consist of different assets, including, stocks, bonds, and commodities.

Other types of investments can include real estate, retirement funds, and peer-to-peer loans.  Each investment type has its own set of pros and cons, so be sure to consider your unique financial situation to find the right investment vehicle for your needs!

#### What is a good rate of return?

Different investment types have different return rate potential! Generally, riskier investments have more potential for a higher return, but they also have higher potential for loss. Low-risk investments are generally considered a safer option if you’re just getting into investing because you’re less likely to lose money, even though there is less to gain. However, no matter what type of investment you put your money into, there’s always the potential outcome that you might lose it all. It’s important to consider whether you can afford that.

By considering historical averages, you can get a better idea of how your expected rate of return holds up.

You can learn more about how to start investing, how to build your investment budget, what newbie investor mistakes to avoid, and more on the Mint blog. But the learning opportunities shouldn’t stop there!

Here are a few other resources you may want to check out to boost your investment knowledge:

### Investment calculator FAQs

#### How do I calculate what my initial investment will be in a few years?

Using our investment growth calculator, you can watch your investments grow years down the road. Just enter your starting investment balance, additional contributions, rate of return, and the number of years you want to factor into the equation.

Let’s say you started with a \$150 investment, adding \$10 per month at a 4% rate of return, and you want to see how much it will grow in five years. Enter the information as follows:

• Starting Amount: \$150
• Rate of Return: 4%
• Years to Accumulate: 5

Once you’re done, our investment calculator will show how much your investment is forecasted to grow.

#### What does the pie chart view say about my investment growth?

The pie chart simply gives you another perspective to look at your investment growth. View how your starting balance, total contributions, and forecasted balance shift over time as your investment strategy changes.

#### What types of investments does this calculator work with?

Our investment calculator works with all investment types, including, stocks, bonds, mutual funds, high-yield savings accounts, and retirement funds.

If you’re using the calculator to help you forecast growth for stocks, it’s important to consider the volatility of your investment portfolio. Stocks that are considered more volatile are typically more risky and therefore more susceptible to changes in the market. This means that the rate of return on your investments could be really high one day and lower the next day.

To factor this unpredictability into your calculations, use a more conservative percentage for your rate of return.

#### How can I use this investment calculator to create goals?

One of the best applications of this tool is that it’s also an investment goal calculator. By looking at the future of your investments with a few key metrics, you can see the growth potential for your investments with your current strategy, and experiment with other possibilities. How much more valuable will your investment be if you contribute to it more frequently? What would happen if you contributed some of your income into a new investment with a higher rate of return?

Use our investment growth calculator in tandem with our budget calculator for an even more holistic view of your financial health and potential.

#### How will taxes impact my investments?

Taxes have a funny way of impacting just about every aspect of your finances. There are two main ways that taxes can make an imprint on your investments:

1. Taxes can change your investable income. Since taxes almost always reduce your annual income, they typically reduce the amount of money you can afford to invest, also known as your investable income. However, if you plan to invest the money you get back on your tax refund, things could work out in your favor. While a tax refund isn’t extra money—it’s the amount you’ve overpaid—it can be convenient to keep the balance out of sight and with the IRS until you’re ready to invest.
2. Taxes can reduce the value of your investment. When it comes time to cash out on your investment, don’t forget to set aside some for Uncle Sam. Long-term investment gains are typically taxed at a reduced rate while income from interest is generally taxed as ordinary income at the federal level. Depending on which state you live, your investment gains may also be subject to state capital gains taxes.

Because tax regulations and rates vary depending on several factors, our investment calculator cannot account for the impact of taxes on your investment.

#### What happens if I change something about my investment, like stop making contributions?

If you decide to make changes to your investment strategy, like ending your contributions or liquidating earlier than planned, the outcome of your initial calculations will change. If you decide to make a change in your strategy, simply use our investment calculator for an updated view of your investments.

## Final Notes

One way people typically grow their passive income is to start investing. There are many different types of investments, from real estate to stocks and bonds, so it’s crucial to have a solid understanding of how investing works before you begin. But if investing is part of your financial plan, you need to know how to calculate ROI so you can determine if your investments are actually bringing you closer to your financial goals.

If you want to get started with investing but aren’t sure how, investing apps can help you get the hang of it. And to see your return on investment calculation, you can use Mint’s investment growth calculator. Knowing how to calculate ROI is essential so that you can measure the profitability of your investments and make better financial decisions.

This is the ninth and final chapter of our investing series, and you should now have a much better understanding of how to invest. Investing can be a daunting task, but if you ever need help along the way, you can always go back and reread any of the chapters in this series. It’s never too late to invest in yourself and build a better future.

This is for informational purposes only and should not be construed as legal, investment, credit repair, debt management, or tax advice.  You should seek the assistance of a professional for tax and investment advice.

Third-party links are provided as a convenience and for informational purposes only. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.

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## Written by Mint

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