Investment Return Calculator (ROI & CAGR)

Whether you are evaluating a completed investment or planning a future one, this calculator provides two fundamental metrics: ROI (Return on Investment) and CAGR (Compound Annual Growth Rate). Understanding both is essential for comparing investment opportunities on an equal footing.

Two Calculation Modes

Mode A — From final value: You know where you started and where you ended. Enter your initial investment, the final value, and the time period. The calculator computes both ROI and CAGR.

Mode B — Forward projection: You know your starting amount and expect a certain annual return. Enter the initial investment, the annual return rate, and the investment period. The calculator projects the final value and confirms the implied ROI.

ROI — Return on Investment

ROI measures the total percentage gain or loss relative to the initial investment:

ROI = (Final Value − Initial Investment) ÷ Initial Investment × 100

ROI is straightforward but has one major limitation: it is time-blind. An ROI of 100% looks the same whether achieved in 1 year or in 20 years — which is why CAGR is often more useful.

Example: $10,000 invested, grows to$15,000. ROI = (15,000 − 10,000) ÷ 10,000 × 100 = 50%

CAGR — Compound Annual Growth Rate

CAGR represents the rate at which an investment would have grown if it grew at a steady rate every year, compounded annually. It is the “smoothed” annual growth rate:

CAGR = (Final Value ÷ Initial Investment)^(1/years) − 1

Example: $10,000 grows to$20,000 over 10 years. CAGR = (20,000 ÷ 10,000)^(1/10) − 1 = 2^0.1 − 1 ≈ 7.18%

This means the investment effectively grew by 7.18% per year, compounded, even though the actual year-to-year returns may have varied significantly.

Why Use CAGR Instead of Simple Average?

Suppose an investment gained 50% in year 1 and lost 33.3% in year 2. The simple average return is 8.35%, but the investment is back to exactly where it started (a $100 investment at +50$150, at −33.3% → $100). The CAGR correctly shows 0% growth. This is why CAGR, not simple averages, is the standard metric for comparing investment performance.

Worked Examples

Example 1 — Index fund performance: $10,000 invested in 2010, worth$35,000 in 2024 (14 years).

• ROI: (35,000 − 10,000) ÷ 10,000 × 100 = 250%
• CAGR: (35,000 ÷ 10,000)^(1/14) − 1 = 3.5^(1/14) − 1 ≈ 9.4% per year

Example 2 — Real estate: $200,000 property purchased in 2015, sold for$340,000 in 2024 (9 years).

• ROI: (340,000 − 200,000) ÷ 200,000 × 100 = 70%
• CAGR: (340,000 ÷ 200,000)^(1/9) − 1 = 1.7^(0.111) − 1 ≈ 6.1% per year

Example 3 — Forward projection: $50,000 invested at 7% annual return for 20 years.

• Final value: 50,000 × (1.07)^20 ≈ $193,484
• ROI: (193,484 − 50,000) ÷ 50,000 × 100 = 287%

Interpreting Your Results

Limitations

This calculator assumes:

• No intermediate cash flows (no dividends reinvested separately, no withdrawals)
• No taxes or fees — in practice, capital gains tax and expense ratios reduce real returns
• Constant compounding — actual investments have variable year-to-year returns

For investments with regular contributions, use the savings goal calculator. For investments with irregular cash flows, use an IRR (Internal Rate of Return) tool.

Frequently Asked Questions

What annual return should I expect from stocks? The S&P 500 has returned approximately 10% per year nominally (7% inflation-adjusted) over the long term. However, actual returns vary enormously by decade and investment period.

Can CAGR be negative? Yes. If your investment lost value (final value < initial investment), CAGR will be negative. This is mathematically meaningful and shows the annual rate of loss.

Is CAGR the same as IRR? CAGR and IRR are equivalent for a single lump-sum investment with no intermediate cash flows. For investments with ongoing contributions or withdrawals, IRR is the more appropriate metric.