Calculate your return on investment (ROI), annualized CAGR, total gain, and total amount invested. Compare lump-sum and periodic investment scenarios with our free calculator.
ROI = Return on investment as a percentage
Final Value = Current or ending value of the investment
Initial Investment = Original amount invested
CAGR = Compound annual growth rate (decimal)
Years = Total investment period in years
Convert to percentage: CAGR × 100%
Total Invested = Initial Investment + (Monthly Contribution × Months)
CAGR = Uses iterative approximation for periodic investments
XIRR method: accounts for timing of each cash flow
You invest $10,000 in a stock. After 5 years, the investment is worth $18,000. No additional contributions.
Total Gain: $18,000 - $10,000 = $8,000
Total ROI: ($8,000 / $10,000) × 100 = 80%
CAGR: (18000/10000)^(1/5) - 1 = 12.47% annually
You invest $5,000 initially, then add $500/month for 3 years. Total invested = $5,000 + ($500 × 36) = $23,000.
After 3 years, the portfolio is worth $28,500.
Total Gain: $28,500 - $23,000 = $5,500
Total ROI: ($5,500 / $23,000) × 100 = 23.91%
Approx CAGR: ~7.4% (accounting for monthly contributions)
You invest $50,000 in real estate. After 4 years, you sell for $42,000.
Total Loss: $42,000 - $50,000 = -$8,000
Total ROI: (-$8,000 / $50,000) × 100 = -16%
CAGR: (42000/50000)^(1/4) - 1 = -4.27% annually
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Return on Investment (ROI) is a financial metric that measures the profitability of an investment relative to its cost. It is expressed as a percentage and helps investors evaluate the efficiency of an investment or compare the profitability of multiple investments.
The basic ROI formula divides the net gain (or loss) of an investment by the total cost of the investment. A positive ROI means the investment generated a profit, while a negative ROI indicates a loss.
ROI is widely used because of its simplicity and versatility. Whether you're evaluating stocks, real estate, business projects, or marketing campaigns, ROI provides a clear, standardized way to measure performance. However, it does not account for the time value of money, which is why annualized ROI (CAGR) is often used alongside it.
Compound Annual Growth Rate (CAGR) is the rate of return that would be required for an investment to grow from its initial balance to its final balance, assuming profits were reinvested at the end of each year. Unlike simple ROI, CAGR accounts for the time value of money and provides an annualized return rate.
CAGR is especially useful when comparing investments with different time horizons. For example, an investment that returns 80% over 5 years has a CAGR of 12.47%, while one that returns 80% over 10 years has a CAGR of only 6.05%. The CAGR reveals which investment performed better on an annualized basis.
While both metrics measure investment performance, they serve different purposes:
| Metric | What It Measures | Best Used For |
|---|---|---|
| Total ROI | Total percentage gain or loss over the entire investment period | Quick profitability check, short-term investments |
| Annualized ROI (CAGR) | Average annual growth rate, accounting for compounding | Comparing investments with different time frames |
For example, an investment that doubles from $10,000 to $20,000:
The total ROI is the same in all cases, but the CAGR reveals which investment grew faster on an annual basis. This makes CAGR the preferred metric for comparing investments across different time periods.