Calculate ROI (total return) and CAGR (compound annual growth rate) from an investment's start and end values, over years or between two dates.
By AdminDrafted with AI writing toolsUpdated Checked examples: 6
Turning $10,000.00 into $16,500.00 over 5 years is a total return of 65%, the same as 10.53% a year compounded.
| Year | Value | Growth since previous row |
|---|---|---|
| 0 | $10,000.00 | $0.00 |
| 1 | $11,053.42 | $1,053.42 |
| 2 | $12,217.82 | $1,164.39 |
| 3 | $13,504.87 | $1,287.05 |
| 4 | $14,927.50 | $1,422.63 |
| 5 | $16,500.00 | $1,572.50 |
Income is treated as received at the end; reinvesting it earlier would change the rate slightly.
ROI is the total gain as a share of the amount invested: (final value + income − amount invested) ÷ amount invested. CAGR turns that into a steady yearly rate, (ending value ÷ amount invested)^(1/years) − 1: the rate that, compounded every year, would reach the same end value. Between two dates, the holding period is the actual number of days divided by 365.25, or by 365 as Excel's XIRR does.
With the defaults, 10,000 growing to 16,500 in 5 years is a 65% total return and a CAGR of 10.53% a year. Dividing 65% by 5 years gives 13%, which overstates the yearly rate because it ignores compounding.
Both figures treat the investment as one payment in and one value out. If you added or withdrew money along the way, use the XIRR calculator, which weights each cash flow by its date.
CAGR = (final value ÷ amount invested)^(1 ÷ years) − 1, and ROI = (final value − amount invested) ÷ amount invested. An investment of 10,000 that grows to 16,500 in 5 years has an ROI of 65% and a CAGR of 10.5342% a year. Use CAGR to compare investments held for different lengths of time.
CAGR is the one steady yearly rate that links the start and end values. The investment's actual yearly returns could have swung widely around it.
Dividing the 65% by 5 years gives 13%, which overstates the yearly rate because it ignores compounding.
ROI = (final value + income − amount invested) ÷ amount invested × 100%. Income is cash you took out along the way, such as dividends, interest or rent, and it counts as received at the end.
1,000 that grew to 1,100 and paid 50 of dividends gained 150, an ROI of 15%. Over two years that is a CAGR of (1,150 ÷ 1,000)^(1/2) − 1 = 7.2381%.
To include costs, use net figures: add purchase fees to the amount invested and subtract selling costs from the final value.
Check it by compounding back: 10,000 × 1.105342296^5 = 16,500.00. Keep the decimals for that check, since a rate rounded to 10.53% gives 16,496.84.
Excel's RRI function computes the same root: =RRI(5, 10000, 16500) returns 0.105342. Its period count sets the unit, so periods in months give a monthly rate.
| Invested | Final value | Income | Years | ROI | CAGR per year |
|---|---|---|---|---|---|
| 10000 | 16500 | 0 | 5 | 65.00% | 10.5342% |
| 10000 | 16500 | 0 | 10 | 65.00% | 5.1353% |
| 100 | 144 | 0 | 2 | 44.00% | 20.0000% |
| 100 | 75 | 0 | 2 | -25.00% | -13.3975% |
| 1000 | 1100 | 50 | 2 | 15.00% | 7.2381% |
| 1000 | 1000 | 0 | 5 | 0.00% | 0.0000% |
| 1000 | 0 | 0 | 3 | -100.00% | -100.0000% |
| 1000 | 1050 | 0 | .25 | 5.00% | 21.5506% |
The same 65% ROI is 10.5342% a year over 5 years but 5.1353% over 10. A loss gives a negative CAGR, and a total loss is −100% whatever the holding period.
An investment that gains 50% and then loses 50% ends at 100 × 1.5 × 0.5 = 75. The arithmetic average of the two returns is 0%, but the two-year CAGR is −13.3975%.
Compound growth multiplies the yearly growth factors; averaging the percentages ignores that, so the average overstates growth whenever returns vary.
Annualizing a short holding period assumes the same return repeats. A 5% gain in 3 months becomes 1.05^4 − 1 = 21.5506% a year, which says little about the next nine months. For short holdings the total return is the plainer figure.
With purchase and valuation dates, years = days between them ÷ 365.25 (an average year) or ÷ 365 (the convention Excel's XIRR uses). Each row below doubles 10,000 to 20,000 with no income:
| Bought on | Valued on | Days | Days per year | Years used | CAGR per year |
|---|---|---|---|---|---|
| 2020-01-01 | 2025-01-01 | 1827 | 365.25 | 5.002053 | 14.8633% |
| 2020-01-01 | 2025-01-01 | 1827 | 365 | 5.005479 | 14.8524% |
| 2023-01-01 | 2024-01-01 | 365 | 365 | 1.000000 | 100.0000% |
| 2024-01-01 | 2025-01-01 | 366 | 365.25 | 1.002053 | 99.7161% |
The five years from 2020 include two leap days, so they span 1,827 days. Neither divisor counts whole calendar years, so state the day basis when you compare two results.
CAGR assumes one payment in and one value out. If you added or withdrew money along the way, use the XIRR calculator, which weights each cash flow by its date.
For the future value of regular monthly investments at an assumed rate, use the SIP calculator.
Tax, fees and inflation are not deducted, so use net values when they belong in the comparison. To measure the change in purchasing power, use the inflation calculator. A CAGR describes past growth, not an offered interest rate or a guaranteed return.
Checked against: 1.65^(1/5) − 1 = 10.5342296%
Checked against: 1,827 days / 365.25 = 5.0020534 years; 2^(1/5.0020534) − 1 = 14.8632986%
Checked against: 365 days / 365 = 1 year, so CAGR equals ROI (definition)
Checked against: √1.15 − 1 = 7.2380529%
Divide the gain by the amount invested and multiply by 100: ROI = (final value + income − cost) ÷ cost × 100. An investment of 10,000 now worth 16,500 has an ROI of 6,500 ÷ 10,000 = 65%. Income you took out counts too: 1,000 that grew to 1,100 and paid 50 of dividends returned 15%.
Divide the ending value by the starting value, raise the result to the power 1 ÷ years, and subtract 1. For 10,000 growing to 16,500 in 5 years, 1.65^(1/5) − 1 = 10.53% a year. In Excel, =RRI(5, 10000, 16500) returns the same rate.
ROI measures the whole gain and ignores time; CAGR spreads it over the years as a compound rate. A 65% ROI is a CAGR of 10.53% if it took 5 years but only 5.14% if it took 10 years. Use CAGR to compare investments held for different lengths of time.
No. The average of yearly returns ignores compounding, so it overstates the growth whenever returns vary. An investment that gains 50% one year and loses 50% the next has an average return of 0%, but it ends at 75% of its starting value, a CAGR of −13.40% a year.
With care, because CAGR assumes the same return would repeat for a full year. A 5% gain in 3 months annualizes to 1.05^4 − 1 = 21.55% a year, which says little about what the next nine months will bring. For short holdings the total return is the plainer figure.
For planning only. Lenders, tax authorities and markets apply their own rounding, fees and rules; confirm figures with them before you commit.
This calculator includes 6 worked examples with independently sourced answers. They run in the test suite, and you can run them here too.