Investment ROI Calculator
Calculate your investment return on investment (ROI), total return, annualized return, and CAGR.
ROI and CAGR measure the same investment outcome differently. ROI tells you the total percentage gain. CAGR (Compound Annual Growth Rate) tells you the equivalent annual rate that would produce the same result, more useful for comparing investments held for different periods.
A 54% ROI over 4 years sounds impressive. The CAGR is 11.4% annually, solid but not exceptional for equity investments. Always convert multi-year returns to annualized rates for fair comparisons between investments.
ROI vs CAGR
ROI = (Final Value − Initial Investment + Income) ÷ Initial Investment × 100. A 54% ROI over 4 years. CAGR = (Final Value ÷ Initial Value)^(1/years) − 1. The same investment: (38,500 ÷ 25,000)^(1/4) − 1 = 11.4% annually. CAGR assumes the return compounds annually at a constant rate, which no real investment does, but it provides a useful normalized comparison rate. CAGR is the right metric when comparing investments held for different lengths of time.
Simple vs compound annual return
Simple annual return divides total ROI by number of years: 54% ÷ 4 = 13.5%/year. This ignores compounding, it assumes gains don't compound on themselves. CAGR accounts for compounding and is generally the more accurate measure of annual performance. For short holding periods (under 3 years), the difference is small. For longer periods, CAGR is significantly more accurate.
Including income in ROI
Total return includes both price appreciation and income (dividends, rental income, interest). A rental property that appreciates $13,500 and generates $6,000 in net rent over 4 years has a total return of $19,500 on a $25,000 investment, ROI of 78% and CAGR of 15.8%. Omitting income significantly understates the true return of income-producing investments.
Frequently asked questions
What's a good ROI on an investment?
It depends on the asset class and risk. US equities have historically returned about 10% nominal annually. Bonds: 3–5%. Real estate: 8–12% total return. Cash: 4–5% in current high-rate environment. Any investment should be compared to the risk-free rate (currently ~4.5% on short-term treasuries), returns below the risk-free rate suggest the risk isn't being compensated.
Does inflation affect ROI?
Yes. Real ROI = ((1 + nominal ROI) ÷ (1 + inflation rate)) − 1. At 3% inflation, a 10% nominal return produces about a 6.8% real return. For long-term wealth building, real (inflation-adjusted) returns are the meaningful metric, nominal gains that don't exceed inflation actually represent a loss of purchasing power.