ROI + CAGR Calculator
Measure total return (ROI) and annualized return (CAGR) from initial cost and final value.
Initial cost
$10,000.00
Final value
$14,500.00
ROI
45%
CAGR
7.71%
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Insights
Generate a concise interpretation of your inputs and outputs. This is educational and hypothetical.
What It Is
The ROI and CAGR calculator helps you evaluate investment performance from two different angles. ROI captures total gain relative to cost over the full holding period. CAGR estimates an annualized growth rate that normalizes performance across different time spans.
These two metrics are complementary. ROI answers, "How much did I make overall?" CAGR answers, "What constant yearly growth rate would produce this result?" If you compare opportunities with different durations, CAGR is usually the fairer comparison method.
This tool is intentionally simple: initial cost, final value, and optional holding period in years. It can be used for stocks, business projects, side-hustle investments, property improvements, or any capital deployment where beginning and ending values are known.
In portfolio review workflows, these metrics are often used as a first-pass diagnostic before deeper due diligence. They can quickly reveal whether a project materially outperformed cash alternatives, matched expectations, or underdelivered relative to its risk profile.
How It Works
ROI is computed as (final value - initial cost) / initial cost. The output is shown as a percentage. Positive ROI indicates gain; negative ROI indicates loss. If initial cost is zero, ROI is set to 0 to avoid divide-by-zero errors.
CAGR requires both a positive initial cost and a valid holding period above zero. The formula is (final / initial)^(1 / years) - 1. This creates a standardized annual return estimate, assuming smooth compounding between starting and ending values.
If holding period is blank or non-positive, CAGR is omitted by design. This keeps output honest and prevents implied precision when timeline inputs are incomplete.
The interface is intended for rapid iteration: adjust one assumption, observe the update, then compare scenarios. This makes it easier to test decisions such as delayed exits, lower sale prices, or higher entry costs without manually recalculating percentages.
Formula
ROI (%) = ((Final Value - Initial Cost) / Initial Cost) x 100. This metric does not account for duration, volatility, or intermediate cash flows.
CAGR (%) = ((Final Value / Initial Cost)^(1 / Years) - 1) x 100. CAGR annualizes total growth but assumes a constant rate, which is rarely true in real markets.
Use ROI for quick profitability checks and CAGR for time-normalized comparison. For more advanced analysis, add cash-flow-aware metrics (such as IRR) in a later version.
Example
Imagine you invest $20,000 and later exit at $29,000. ROI is 45%. If that took 5 years, CAGR is about 7.7% per year. If it took 10 years, CAGR drops materially even though ROI remains 45%.
This is why duration matters. A high total return achieved over a long period may be less attractive than a lower total return achieved quickly, depending on your alternative opportunities and risk profile.
In practical decision-making, pair these numbers with qualitative factors: concentration risk, liquidity, taxes, uncertainty, and your need for capital access.
Frequently Asked Questions
Should I use ROI or CAGR to compare two investments?
Use CAGR when holding periods differ. Use ROI for a simple total-return snapshot when timing is less important.
Does this include fees, taxes, or dividends?
Only if you include them in your initial and final values. The calculator itself does not model intermediate cash flows.
Can CAGR be negative?
Yes. If final value is lower than initial cost, CAGR will be negative for valid holding periods.