Practical guide
Understanding investment return comparison — two-scenario comparison
Everyday editorial team · GEOINNOVATION CO., LTD · Published · Updated
What this calculation is for
An annualized return turns a starting and ending value into a comparable compound rate. It is meaningful only when the cash-flow assumptions match: deposits made inside the holding period cannot simply be mistaken for investment gains.
How the method works
The ending-to-starting value ratio is raised to the reciprocal of years. Entered inflation and fee assumptions provide a simplified illustrative real-return comparison rather than an exact tax-adjusted performance measure. The displayed model uses: Annualized compound growth from beginning and ending values; subtract entered annual inflation and fees for illustrative real return.
A worked example
For an illustrative investment return comparison scenario, use Starting value: 10000 $; Ending value: 18000 $; Holding period: 8 years; Inflation assumption: 2.5 %; Estimated annual fee: 0.25 %. The modeled annualized compound return is 7.62%. These are example assumptions, not current prices, official benefit amounts or personalized advice.
Assumptions and real-world differences
A positive starting value is required. Interim deposits, withdrawals, dates and tax effects are excluded; use a cash-flow-aware return method for a portfolio with substantial external flows. Cash flows inside the period change the interpretation; this comparison is not an investment performance report.
Building two independent scenarios
Scenario A and Scenario B each have a complete set of inputs for this investment return comparison calculation. Change several inputs in B when comparing genuinely different plans, then inspect the B-minus-A headline difference and the detailed rows. When multiple inputs change, the total difference cannot be attributed to just one of them.
Reproduce this tool’s example
These fixed example inputs are independent of edits you make above. Enter them in this tool to reproduce the result, then replace them with your own assumptions.
- Scenario A — Starting value
- 10,000 $
- Scenario A — Ending value
- 18,000 $
- Scenario A — Holding period
- 8 years
- Scenario A — Inflation assumption
- 2.5 %
- Scenario A — Estimated annual fee
- 0.25 %
- Scenario B — Starting value
- 12,500 $
- Scenario B — Ending value
- 18,000 $
- Scenario B — Holding period
- 8 years
- Scenario B — Inflation assumption
- 2.5 %
- Scenario B — Estimated annual fee
- 0.25 %
Scenario B result: 4.66%
Scenario A: 7.62%. Annualized compound return.
- Scenario A main result: 7.62%
- Scenario B main result: 4.66%
- Numeric difference (B − A), in result units: -2.96
Frequently asked questions
- Is this the same as money-weighted return?
- No. A money-weighted calculation incorporates the amounts and timing of intermediate cash flows.
- Which inputs should I check before using this investment return comparison estimate?
- Check starting value, ending value, holding period, inflation assumption, estimated annual fee. Match each field’s unit and time period, then compare the detailed rows rather than treating the headline alone as the complete answer.
- Why is this different from the one-factor comparison?
- The one-factor tool changes only starting value. This version lets all model inputs differ, so it is more flexible but does not isolate the effect of any single change.