Tracking your investing returns is a way to see how much you are making or losing on your investments. Find out more about how to calculate your returns and why this is important information to have.
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What is your personal rate of return?
Your personal rate of return tells you how much profit or loss you have made on your investments over time. It is determined by taking the total current value of all your investments and subtracting the initial amount you paid for them, as well as any fees you paid over a specific period of time. The rate of return is often calculated annually.
It’s important to know your rate of return because:
- It shows how much money your investments have made or lost. Knowing the current value of your investments is just part of the full picture — you’ll want to know how their value has changed, and in what way.
- Personal rate of return is not always disclosed. For example, not all mutual fund companies show your personal rate of return.
Your rate of return can be positive (worth more than it was), negative (worth less than it was), or it may have stayed the same.
How do you calculate your personal rate of return?
If you work with an advisor, you can ask your advisor to calculate your return for you. You can also calculate it yourself using a financial calculator or spreadsheet software.
To calculate your personal rate of return you will need:
- The total value of your investments at the end of the previous year.
- The total value of your investments at the end of the year for which you’re calculating your personal rate of return.
- The exact amount you invested during the year and the months in which you made the investments. Include any fees you paid to hold, buy and sell the investments, and consider taxes.
To estimate your rate of return, take the current value of your investments, then subtract the amount they were worth the previous year, as well as the amount you invested and the fees you paid. Multiply this number by 100 to get the rate of return as a percentage.
Total cost reporting
Most investments have fees associated with them. Some fees can be more obvious to track than others. Mutual funds and ETFs often have embedded fees as an ongoing expense of managing the fund. New total cost reporting enhancements will require transparency around embedded fees. These reporting enhancements will take effect on January 1, 2026, so that you will see an annual statement on total investment costs in January 2027.
How does knowing your rate of return help you?
There are three main ways your rate of return can help you track your progress.
- Compare against your investing goals. Your financial plan likely has a few investing goals you’re trying to reach. A certain rate of growth, as well as your own regular contributions, will help you reach those goals. Once you’ve got your estimated rate of return, compare it with how much you have invested, and the growth rate you wanted. This should give you an idea of whether you’re on track.
- Compare against the current rate of inflation. Ideally, your investments should be growing at a higher rate than inflation, so that you’ll be getting a real return. This may not always be possible. For example, during periods of very high inflation, many types of investments can struggle to keep up. However, if your personal rate of return is routinely lower than the rate of inflation, it may be worth considering changes.
- Compare against a benchmark index. An index is a collection of securities or other assets that represents the performance of a portion of the market at a particular point in time. Comparing your personal rate of return with an index is a way to see how your investments are doing relative to the market. For example, if you’ve invested in Canadian equities, you can compare your returns with the S&P/TSX Composite Index. If you have a mix of equities and fixed income investments, you might want to use a blended index as your benchmark. You may want to talk to an advisor if you’re not sure what index to use.
If your rate of return is on track with your goals, and your investments are performing well given market conditions, it can be reassuring. However, if your rate of return is below where you’d like it to be, you may choose to make changes to your investments. You could revisit your level of diversification, rebalance your portfolio, or review your investing strategy. Speak to your advisor about options, or consider whether it’s time to change your source of financial advice.
Summary
Your personal rate of return provides important information about how your portfolio is performing. Your rate of return:
- Tells you how much your investments have gained or lost.
- Is often calculated annually.
- Can be calculated by taking the current value of your investments, and then subtracting the amount they were worth the previous year, as well as the amount you invested and the fees you paid.
- Can be compared against your investing goals, rate of inflation, or a benchmark index to indicate your progress.
