How to calculate investment returns: ROI vs CAGR
Two numbers describe an investment’s performance, and people mix them up constantly. ROI is the total gain; CAGR is the smooth annual rate. Knowing which to quote — and when — keeps you from fooling yourself.
ROI: the total gain
Return on investment is simply (final − initial) ÷ initial × 100. Turn $5,000 into $18,000 and your ROI is 260%. It’s honest but silent about time — 260% over one year is spectacular; over 30 years it’s mediocre.
The Stock Profit and Crypto Profit calculators report ROI for a single position, fees included.
CAGR: the annualized rate
Compound annual growth rate answers “what steady yearly return would get me here?”: (final ÷ initial)^(1/years) − 1. That $5k → $18k over 10 years is a 13.6% CAGR — the figure you can compare against other investments and the market. Compute it in the Investment Return calculator.
Don’t forget dividends, fees, and inflation
- For a true total return, include reinvested dividends — price-only figures understate dividend stocks.
- Subtract fees and trading costs; they compound against you.
- Adjust for inflation if you want your real return — see what inflation does to your money.
Frequently asked questions
- What is the difference between ROI and CAGR?
- ROI is the total percentage gain regardless of time. CAGR is the equivalent steady annual rate, which lets you compare investments held for different lengths of time.
- Is a higher CAGR always better?
- Not without considering risk. A volatile asset and a steady one can share a CAGR; for the same return, the steadier one is usually preferable.
- How do I compare my return to the market?
- Compute your CAGR and compare it to a benchmark like the S&P 500’s long-run average of roughly 7–10% per year before inflation.
Run your own numbers
Put this guide into practice — these calculators run free in your browser.