How Do You Calculate the Return on An Investment Calculator?

To calculate the return on your investment using an investment calculator, you just need to enter the required data, which would be the amount of money you want to invest. The frequency at which you would like to invest and the amount of time you would like to keep your money invested. With just these three pieces of information presented by you, an investment calculator can predict the amount of money you will receive as a return on your investment. Or you can use a return on investment calculator to calculate the returns you have already received.

As you would notice, the previous scenario does not require you to enter the return percentage. This is because the calculators generally pull the return percentage based on the performance and return provided by the fund you have selected. The return percentage remains the same for all investors and is subject to increase or decrease
based on the market conditions.

Now that you know all about finding out your investment returns using an investment calculator let’s learn more about return on investments and how the return on investment calculator works.

What Are Return on Investments & What Are The Factors That Help Define It?

When/if you are interested in investing your money in any financial instrument, the first and most important thing that comes to your mind is, what is the return on your investment? The return on your investment is the value that you get in return for investing your money in a financial instrument for a set period of time. This value includes the total sum of money you have invested plus the money you have earned as a profit for investing in the said financial instrument.

The amount of profit you can earn depends on two factors mainly:

● The type of investment can be anything from gold, stocks, insurance, mutual funds, or ulips. The return percentage on your investment greatly varies among these investment choices. For stocks or mutual funds, you can receive high returns, but it comes at a greater risk of losses. If you invest in gold, your gains will be less, but your overall investment will be secure, and you will have very low risk.

● The amount of time you invest can also determine the overall return on your investment. If you are investing for a few hours, your possibility of running a loss would be much higher, and your returns would be quite minuscule. Instead, if you were to invest your money for years on end, your investments will bring insane amounts of returns thanks to compound interest.

What Is a Return On Investment Calculator?

A return on investment calculator is a tool that you can use to calculate the amount of profits you have earned from the buying and selling of a financial instrument. You can find out detailed information about your investment and its profitability at different periods using the return on investment calculator.

For using the return on investment calculator, you would have to just enter the total amount you invested, the amount you got in return, and the period for which you had invested your money. Using the return on investment calculator, you can find out the data about your total gains/profits, the annualised returns, the absolute returns, and the compounded annual growth rate or CAGR.

How Does the Return on Investment Calculator Work?

Suppose your friend has bought a ulip plan and they made good benefits on it. You may not know how ulip plan works, but you can still figure out the return on investment of your friend’s ulip plan using the return on investment calculator. The calculator shows you two values: the total gains/profits and the annualised returns. Let’s learn how the return on investment calculator extracts the data from your provided information.

● Total Gains/Profits

Calculating the total gains or profits is relatively simple. All you have to do is subtract the investment amount from the return amount, then divide the answer by the investment amount and to change the total gains into a percentage, multiply the answer by 100.

So, for example, your friend invested Rs. 25,000 in the ulip plan and got a return of Rs. 30,000. Then the total gains received would be:

30,000 – 25,000 / 25,000 * 100 which would equate to 20%.

● Annualised Returns

Calculating the annualised returns is a bit more tricky, but the return on investment calculator uses a formula to generate the results. The formula is investment amount subtracted from the return amount and divided by the investment amount multiplied by hundred and again multiplied by one divided the number of years your friend continued the investment.

So, for example, if your friend invested Rs. 25,000 got a return of Rs. 30,000 after holding on to the investment for five years. The annualised returns would be:

30,000 – 25,000 / 25,000 * 100 * 1 / 5 which would be equal to an annualised return of 13.333%.