Cumulative Return: Definition, Calculation, and Example

What Is Cumulative Return?

A cumulative return on an investment is the aggregate amount that the investment has gained or lost over time, independent of the amount of time involved. The cumulative return is expressed as a percentage, and it is the raw mathematical return of the following calculation:

 ( C u r r e n t   P r i c e   o f   S e c u r i t y ) ( O r i g i n a l   P r i c e   o f   S e c u r i t y ) O r i g i n a l   P r i c e   o f   S e c u r i t y \frac{(Current\ Price \ of \ Security) - (Original \ Price \ of \ Security)}{Original \ Price \ of \ Security} Original Price of Security(Current Price of Security)(Original Price of Security)

Key Takeaways

  • The cumulative return is the total change in the investment price over a set time—an aggregate return, not an annualized one.
  • Reinvesting the dividends or capital gains of an investment impacts its cumulative return.
  • Cumulative return figures for ETFs and mutual funds typically omit the impact of annual expense ratios and other fees on the fund's performance.
  • Taxes can also substantially reduce the cumulative returns for most investments unless they are held in tax-advantaged accounts.

Understanding Cumulative Return

The cumulative return of an asset that does not have interest or dividends is easily calculated by figuring out the amount of profit or loss over the original price. That can work well with assets like precious metals and growth stocks that do not issue dividends. In these cases, one can use the raw closing price to calculate the cumulative return.

On the other hand, the adjusted closing price provides a simple way to calculate the cumulative return of all assets. That includes assets like interest-bearing bonds and dividend-paying stocks. The adjusted closing price incorporates the impact of interest, dividends, stock splits, and other changes on the asset price. So, it is possible to obtain the cumulative return by using the first adjusted closing price as the original price of the security.

The cumulative return usually grows over time, so it tends to make older stocks and funds look impressive. It follows that the cumulative return is not a good way to compare investments unless they launched at the same time.

Special Considerations

Mutual Funds and ETFs

A common way to present mutual fund or exchange traded fund (ETF) performance over time is to show the cumulative return with a visual, such as a mountain graph. Investors should check to confirm whether interest or dividends are included in the cumulative return. The marketing materials or information accompanying an illustration typically provide this information. Such payouts might be counted as reinvested or simply added as raw dollars when calculating the cumulative return.

One notable difference between mutual funds and stocks is mutual funds sometimes distribute capital gains to the fund holders. This distribution usually comes at the end of a calendar year. It consists of the profits the portfolio managers made when closing out holdings. Mutual fund owners can reinvest those capital gains, which can make calculating the cumulative return more difficult.


Many advertisements use the cumulative return to make investments look impressive. While these results are often basically accurate, they can be exaggerated or distorted to encourage greed or fear. For example, someone might sight Amazon's cumulative return of over 100,000% between its initial public offering (IPO) in 1997 and 2020. However, many other technology-related companies had IPOs in the late 1990s, and most of them never came close to Amazon's returns. Furthermore, investors would have had to continue holding the stock through a bear market that reduced its value by over 90% during 2000 and 2001.

Precious metals are another area where investors need to look carefully at advertisements using total returns. Crucially, ads for bullion are not governed by the same regulations as mutual funds and ETFs. Furthermore, these cumulative returns typically do not subtract storage costs or insurance fees, which are services that many investors demand. While precious metals ETF fees are generally lower, they also need to be deducted from returns for the commodity to obtain the cumulative return that investors actually received.


Taxes can also substantially reduce the cumulative returns for most investments unless they are held in tax-advantaged accounts. Taxes are a particular issue for bonds because of their relatively low returns and the unfavorable tax treatment of interest payments. However, municipal bonds are often tax-exempt, so cumulative return figures require less adjustment.

Long-term stock investments enjoy the advantage of paying a relatively low capital gains tax, which is also usually easy to subtract from cumulative returns. The tax treatment of dividends is a much more complicated subject. However, it can also influence cumulative returns when funds reinvest dividends.

Compound Return

Along with the cumulative return, an ETF or other fund usually indicates its compound return. Unlike the cumulative return, the compound return figure is annualized. Cumulative returns may seem more impressive than the annualized rate of return, which is usually smaller. However, they typically omit the effect of the annual expenses on the returns an investor will receive. Annual charges an investor can expect include fund expense ratios, interest rates on loans, and management fees. When worked out on a cumulative basis, these fees can substantially eat into cumulative return numbers.

Example of Cumulative Return

For example, suppose investing $10,000 in XYZ Widgets Company's stock for a 10-year period results in $48,000. With no taxes and no dividends reinvested, that is a cumulative return of 380%.

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