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Investment Return Calculator

Evaluating past investment performance requires solving backwards from financial results to rates of return. This reverse-direction calculator solves

Finance
$
Capital originally invested at the start of the holding period
$
Final value of the investment at conclusion of term
years
Number of years the investment was held
Formula & Methodology
CAGR = (Ending Value ÷ Initial Investment)^(1 ÷ Years) − 1 | Total Return % = [(Ending − Initial) ÷ Initial] × 100

Unlike the simple arithmetic average (which divides total return by years and overstates compound performance), the Compound Annual Growth Rate (CAGR) represents the smoothed annual rate at which an investment would have grown if it compounded at a steady rate each year.

Compound Annual Growth Rate (CAGR) over 5.0 Years

+10.00% CAGR

Overview

Evaluating past investment performance requires solving backwards from financial results to rates of return. This reverse-direction calculator solves for both cumulative total return and the Compound Annual Growth Rate (CAGR)—the true geometric annualized metric recognized in quantitative asset management.

Educational & Performance Measurement Disclaimer: This calculator computes historical performance metrics from entered beginning and ending values. It is not financial advice. Past investment returns do not predict future portfolio outcomes.

Worked Examples

Acceptance Standard: $10,000 Growing to $16,105.10 Over 5 Years

Initial = $10,000, Ending = $16,105.10, Years = 5.

  1. Ratio of ending to initial value: $16,105.10 ÷ $10,000 = 1.610510.
  2. Take the 5th root: (1.610510)^(1 ÷ 5) = (1.610510)^0.20 = 1.100000.
  3. Subtract 1: 1.100000 − 1 = 0.1000 = 10.00% CAGR.
  4. Compare with arithmetic average: 61.05% ÷ 5 = 12.21% (arithmetic overstates by 2.21%).
Final Answer: 10.00% CAGR (Total Return: +61.05%)

Geometric vs. Arithmetic Volatility Drag (+50% then -50%)

Demonstrates why arithmetic averages fail on volatile returns.

  1. Initial = $100. Year 1 gains 50% to $150. Year 2 loses 50% to $75.
  2. Total return over 2 years: ($75 − $100) ÷ $100 = −25.0%.
  3. Arithmetic average: (+50% − 50%) ÷ 2 = 0.0% (misleading).
  4. Geometric CAGR: ($75 ÷ $100)^(1/2) − 1 = √(0.75) − 1 = 0.8660 − 1 = −13.40% CAGR.
Final Answer: -13.40% CAGR (-25% cumulative loss)

Doubling Money over 7 Years

Initial = $25,000, Ending = $50,000, Years = 7.

  1. Ratio: $50,000 ÷ $25,000 = 2.0.
  2. CAGR: (2.0)^(1/7) − 1 = 1.10409 − 1 = 10.41% CAGR.
Final Answer: 10.41% CAGR (+100% Total Return)

How to Use This Calculator

  1. Enter your initial starting investment amount (purchase price or cost basis).
  2. Enter the ending liquidated portfolio value.
  3. Enter the holding period duration in years.
  4. Review your exact Compound Annual Growth Rate (CAGR) alongside cumulative dollar gains and total percentage return.

Frequently Asked Questions

Why is CAGR preferred over the average annual return?
Average annual return is an arithmetic mean that ignores volatility drag. If a portfolio gains 50% in year one and loses 50% in year two, the arithmetic average is 0%, but your actual wealth dropped from $100 to $75 (a 25% loss). CAGR correctly reports the true annualized return of −13.40%.
Does CAGR account for interim deposits or withdrawals?
No. Standard CAGR assumes a static lump sum held from beginning to end. If you made ongoing cash injections or withdrawals during the holding period, the Internal Rate of Return (IRR) or Money-Weighted Rate of Return is the appropriate metric to use.
Can CAGR be negative?
Yes. If your ending investment value is lower than your initial cost basis, the CAGR will be a negative percentage, indicating an annualized loss rate.
How do dividends affect the return calculation?
If dividends were reinvested to purchase additional shares, they are already reflected in the higher ending portfolio value. If dividends were received in cash and paid out, add the total cash dividends received to your ending value to capture total return.
What is a good CAGR for a long-term investment?
Over long horizons (10 to 30 years), a CAGR of 7% to 10% in equities has historically represented strong market performance. Over shorter periods, individual stocks or real estate can deliver higher or lower CAGRs depending on cyclical market conditions.

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Reviewed & Authored by: OnlineConvers Quantitative Finance Editorial Team · Last Updated: 2026-10-07
Solves backwards for annualized investment performance. Applies geometric root formulation: CAGR = (P1 / P0)^(1 / t) − 1. Strictly guards against zero and negative time horizons and zero initial investments. Contrasts geometric growth against arithmetic averages to highlight compounding volatility drag.
Citations: Global Investment Performance Standards (GIPS) (CFA Institute (cfainstitute.org)) · Analysis of Investments and Management of Portfolios (Reilly and Brown (Cengage Learning))