ROI & CAGR Calculator — Return on Investment

Find total return on investment and the annualized growth rate between any two values — an investment, a house, a business or an ad campaign. Optionally include dividends, rent or other income received along the way.

How this calculator works

Return on investment is the total percentage gain over the holding period: ROI = (ending value + income received − starting value) ÷ starting value. Including income matters because distributions are part of your return even though they are no longer reflected in the current price.

Compound annual growth rate rescales that same journey into a per-year rate: CAGR = (ending ÷ beginning)^1/years − 1. The exponent is what separates it from a simple average of yearly returns — it assumes gains compound, so each year's return builds on the last. Both values must be positive, and the periods must be equal for the annual figure to mean anything.

The remaining outputs are derived for context. The growth multiple is ending divided by beginning. Average gain per year spreads the dollar gain evenly, ignoring compounding. Doubling time uses ln 2 ÷ ln(1 + CAGR), the exact version of the Rule of 72 shortcut. The real-return cell deflates the CAGR by a 3% inflation assumption, giving a rough sense of purchasing-power growth.

Comparing investments honestly

The two numbers answer different questions, and using the wrong one is the most common mistake in personal finance comparisons. ROI tells you what happened in total and is fine for a one-off purchase with an obvious start and finish. CAGR is the figure to compare against benchmarks, since indices are quoted as annualized returns; comparing a five-year total return against a one-year market return is meaningless.

Volatility widens the gap between the two in ways that mislead. A portfolio that gained 50% then lost 40% has an average annual return of +5%, yet $100 becomes $150 and then $90 — a CAGR of about −5.1% a year. The more variable your returns, the further the arithmetic average sits above what you actually earned. Compare CAGR against CAGR, over identical periods, using real rather than nominal figures if the period spans years of meaningful inflation.

Taxes and fees sit outside both formulas. A 10% nominal CAGR in a taxable account may be a 7% real after-tax return once capital gains and dividend taxes are paid, and expense ratios quietly subtract from the compounding base every year. For anything taxable, treat these outputs as pre-cost upper bounds.

Frequently asked questions

What is the difference between ROI and CAGR?

ROI measures total percentage gain over the whole holding period and ignores how long it took. CAGR converts the same gain into an annualized rate you can compare against other investments or against a benchmark. An investment that grows from $25,000 to $41,000 has an ROI of 64%, but if that took 6 years the CAGR is only about 8.6% per year — the honest figure to compare with an index fund. Use ROI for "did this work" and CAGR for "was this the best available use of the money."

How do I calculate CAGR?

CAGR = (ending value divided by beginning value) raised to the power of 1 divided by the number of years, minus 1. For growth from $25,000 to $41,000 over 6 years: (41,000 ÷ 25,000) to the power of 1/6, minus 1, equals about 0.0859, or 8.59% per year. Both values must be positive and the periods equal, normally whole years — a fractional year such as 2.5 works fine as long as you are consistent when comparing.

Should dividends be included in ROI?

Yes, if you actually received them, because they are part of your return. Add all distributions — dividends, rent, interest — using the income field before calculating. Leaving them out understates the result, sometimes severely: an index fund returning about 8% a year in price has historically delivered roughly another 1.5 to 2 percentage points in dividends, and reinvesting them is a large part of long-run compounding. If you spent the income rather than reinvesting it, include it anyway — you received value, just not compounding.

Why is my CAGR lower than my average annual return?

Because CAGR reflects compounding while a simple arithmetic average ignores the sequence of outcomes. A 50% gain followed by a 40% loss averages 5% a year, but your money went from 100 to 150 to 90 — a CAGR of about −5.1% per year. Whenever returns are volatile, CAGR sits below the arithmetic average and the gap widens with volatility. This is not rounding noise: it is the arithmetic cost of losing a percentage of a larger base. Always quote the compound figure.

Is a negative CAGR possible?

Yes. If the ending value is below the beginning value, CAGR is negative: $50,000 falling to $35,000 over four years is a −30% total return and about −8.5% per year. The CAGR formula needs both endpoints positive, so a total wipeout to zero yields −100% ROI but no meaningful annualized rate, which this calculator reports as not applicable rather than inventing a number. Negative starting values — a position shorted or a loss-making project — also break the ratio.

What counts as a good ROI?

It depends entirely on risk and time horizon, which is why comparing raw percentages misleads. The S&P 500 has returned about 10% a year nominally since 1926, roughly 7% after inflation, so beating that sustainably is hard without taking more risk. A business investment typically needs to clear its cost of capital, often 8 to 15% depending on the firm. Cash and short-term Treasury bills sit near current money-market yields, so any ROI above that comes with risk somewhere in the structure.

Last updated Oct 6, 2026 — past returns never guarantee future performance; verify every figure you enter.

Estimates for general information only, not financial advice — see our disclaimer.

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