About this calculator
Two numbers describe any investment result. ROI tells you the total gain as a percentage, which is useful for a quick check. CAGR tells you the equivalent yearly rate, which is the only fair way to compare a two-year holding against a ten-year one.
How it works
CAGR solves for the constant annual rate that would grow your starting amount to the ending amount over exactly the period you held it. Fees are subtracted before the calculation, so you can see what the cost of advice actually did to your return.
Frequently asked questions
What is the difference between ROI and CAGR?
ROI is the total percentage gain over any period, regardless of length. CAGR is the annualized rate that would produce the same gain compounded over each year. Compare investments using CAGR, because ROI depends heavily on the holding period.
How do I calculate CAGR?
CAGR = (Ending Value / Beginning Value)^(1/n) − 1, where n is the number of years. For a $25,000 investment growing to $38,000 over three years, CAGR is about 15.0%.
What is a good annual investment return?
A sustained 7 to 8% real return before fees is an excellent long-term result for a diversified portfolio. Consistently beating that usually indicates higher risk or luck rather than skill.
Do fees really matter over time?
Yes, dramatically. A 1% annual fee over 30 years on $10,000 growing at 7% costs roughly $13,000 of final value, which is a large share of the ending balance.
Should I include dividends in the return?
Yes. Total return includes capital appreciation plus dividends and interest. Price alone understates performance for income-producing investments.
What is a reasonable ROI target?
For planning, assume 7 to 8% annual growth for a diversified stock and bond portfolio, and 3 to 4% for cash savings. Using realistic assumptions prevents planning around a return that does not materialise.