Investment Return Calculator: ROI, CAGR and Compounding
Investment Return Guide
An investment return calculator tells you how much an investment gained or lost — and, just as importantly, how fast. A single percentage without a time frame can be misleading, so this guide covers both simple return (ROI) and annualized return (CAGR), and shows when to use each.
What "return" really means
Return is the change in value relative to what you put in. A 60% gain sounds great, but it means something very different over one year than over ten. That is why investors pair total return with an annualized figure that puts every investment on the same yearly scale.
The ROI formula
Return on investment measures total gain as a percentage of the amount invested.
ROI = (final value − initial value) ÷ initial value × 100
The CAGR formula
Compound annual growth rate expresses that gain as a steady yearly rate, which is ideal for comparing investments held for different lengths of time.
CAGR = (final ÷ initial) ^ (1 ÷ years) − 1
A worked example
Say you invested $10,000 and it grew to $16,000 over 5 years.
Initial: $10,000
Final: $16,000
Years: 5
ROI = (16000 − 10000) ÷ 10000 × 100 = 60%
CAGR = (16000 ÷ 10000) ^ (1÷5) − 1 ≈ 0.0986 = 9.86% per year
The investment returned 60% in total, which is the same as growing about 9.86% every year. CAGR is the number you would compare against another fund or a savings rate.
How to use the calculator online
- Enter the initial amount you invested.
- Enter the final value (or an expected growth rate).
- Enter the number of years held.
- Read the total ROI and the annualized return.
When it helps
- Comparing two funds or assets held for different periods.
- Judging how a past investment actually performed.
- Setting realistic expectations for future contributions.
Remember that past returns do not guarantee future results, and that inflation and fees reduce your real gain. This is general information, not financial advice.
FAQ
Q: What is the difference between ROI and CAGR?
A: ROI is the total percentage gain regardless of time; CAGR converts that gain into a steady annual rate so different holding periods can be compared fairly.
Q: What is a good annual return?
A: It depends on the asset and risk. Historically, broad stock market averages have landed in the high single digits per year over long periods, but any single year varies widely.
Q: Does this account for inflation?
A: Not by default. To get a "real" return, subtract the inflation rate from your annualized return.