Investment Returns Calculator

There are many assets you can invest your money in, but stocks, bonds, cash equivalents (like money market funds) and cash alternatives (like real estate or gold) are the most common. Each asset class offers different levels of returns, as well as different levels of risk. 

Your holding period, or the amount of time that passes between when you buy and sell an asset, determines how long your investment has to grow and your tax rate.  

The longer an asset has to grow, the more it will be able to take advantage of market recoveries. For instance, the S&P 500 index, which is often used as a proxy for the overall U.S. stock market, climbed roughly 44 percent between the beginning of 2022 and the beginning of 2026. That’s a solid return for someone who was able to hold on to their shares through the up and downs of recent market volatility. But the index fell 18 percent between the beginning of 2022 and early 2023, illustrating how someone who sold after just a year of holding their shares would have been in the red. Similarly, bond market performance can vary significantly from year to year, although typically not as much as stocks. 

On the tax front, if you sell an asset at a profit after holding it for a year or less, it’s considered a short-term gain. If you hold it for more than a year, it’s a long-term gain. Short-term gains are typically taxed as ordinary income (the same way wages are taxed), while long-term gains are taxed at 0 percent, 15 percent or 20 percent. Long-term gains typically face lower taxes than short-term ones.

Historical average rates of return can be helpful when estimating how much you might earn on your investments. But it’s important to keep in mind that past performance is not an indicator of future returns, and just because an asset is soaring or plummeting one year doesn’t mean it will do the same the next. 

Nevertheless, the historical average long-term returns for stocks, bonds and cash can be useful when determining where to invest your money based on your risk tolerance and time horizon. Stocks have generated annualized returns of 10.5 percent since 1926, while bonds and cash experienced annualized returns of roughly 5 percent and 3.3 percent respectively, according to Morningstar. 

​Rising prices are the archenemy of retirees: Over time, everything from gas and groceries to health care and housing gets more expensive. As people live longer than ever, it’s especially important for their retirement savings to keep up with inflation. But that can be hard, especially during periods of market downturns.   

The Federal Reserve’s target annual inflation rate is 2 percent, but the U.S. inflation rate can vary widely from year to year. For example, inflation hit a more than 40-year high in 2022, ending the year with an annual inflation rate of 6.5 percent, according to the Bureau of Labor Statistics’ (BLS) Consumer Price Index (CPI), the government’s main gauge of inflation. In 2023, it dropped to 3.4 percent, and by 2025, it was 2.7 percent. Some people prefer to see their investment returns on an inflation-adjusted basis, known as the real return. Inflation has run about 3.23 percent annually over the past decade, per BLS data.  The stock market saw an annualized  return of around 14 percent during that time, according to Morningstar. If you had invested in stocks, your real return over the past 10 years has been about 10.77 percent a year.

Income-oriented investors often seek out dividend stocks. Dividends are payments companies make to investors quarterly to reward them for holding the company’s stock. Bond holders receive income via interest payments (although some bonds pay interest only after the bond matures). 

If you own stocks or bonds within a fund, the fund manager will typically reinvest those dividends and interest. Don’t overlook the impact of reinvested dividends on your return: Eighty-five percent of the S&P 500’s cumulative total return (or 30 percent on an average annual basis) is thanks to reinvested dividends and the power of compounding, according to an analysis from Hartford Funds. For bonds, which are interest-bearing securities, reinvested interest accounts for an even larger chunk of your total returns.

When you compare two investments, don’t compare apples to oranges. For example, the risk-and-return profiles of stocks, bonds and cash are very different. Stocks offer higher potential returns but also come with higher risk. Similarly, holding an individual stock is riskier than holding a mutual fund or an exchange-traded fund (ETF), which contains a large basket of stocks.

Even within the bond world, there is a wide variety of offerings (and risk). Government Treasuries are considered less risky than high-yield corporate bonds, but they also come with lower potential returns. A balanced portfolio has a mixture of asset classes, each with their own risk-and-return profile. Your portfolio’s allocation will depend on your investment goals and appetite for risk.