Investment ROI Calculator

Total ROI is the percentage gain over the entire holding period: (final − initial) / initial. It tells you how much the investment grew in dollars, but it ignores how long it took to get there. Doubling your money in 2 years and doubling your money in 20 years are both 100% ROI — and obviously not equally good investments.

CAGR (Compound Annual Growth Rate) normalizes for time. CAGR = (final / initial)^(1 / years) − 1. The first example above is a CAGR of about 41.4%; the second is about 3.5%. CAGR is the rate that, if compounded annually, would have produced the same end balance. It's the apples-to-apples way to compare investments of different durations.

CAGR assumes a single deposit at the start and a single withdrawal at the end. If you added or pulled money along the way, CAGR overstates or understates the true experience — use IRR (internal rate of return) or money-weighted return instead. For a single buy-and-hold position, CAGR is the correct number.

For stocks and ETFs, the total return includes dividends reinvested, not just price changes. Over the long run, dividends and reinvestment historically account for roughly a third to a half of the S&P 500's total return. Comparing two ETFs by price chart alone routinely misranks them — always use total-return data.

For bonds and bond funds, the total return includes coupon payments and price changes. A bond fund can post a positive total return in a year when the NAV declined, because the coupons more than offset the price drop.

For real estate, total return mixes rental income (cash-on-cash), principal paydown on the mortgage, and price appreciation. A pure ROI calculation that looks only at sale price minus purchase price ignores most of the actual return.

Nominal return is the number on the brokerage statement. Real return subtracts inflation and is what your purchasing power actually did. A 7% nominal return in a 4% inflation year is a 3% real return. Long-run US stock market returns of about 10% nominal are closer to 6.5–7% real after inflation.

After-tax return subtracts taxes on dividends, interest, and realized gains. Long-term capital gains in the US are taxed at 0/15/20% federally; short-term gains are taxed as ordinary income. A taxable account return of 8% nominal can become 5.5–6% after tax for a high earner, before considering state taxes.

When comparing investments, pick one definition and stick to it across all candidates. Comparing an IRA's pre-tax return to a brokerage account's after-tax return is the most common mistake, and it usually makes the IRA look much better than it actually is.

You bought 100 shares of a stock at $100/share, for a $10,000 initial investment. You held it for 5 years, reinvested $500 in dividends, and sold at $175/share for $17,500. Total invested = $10,000 + $500 = $10,500. Profit = $17,500 − $10,500 = $7,000. Total ROI = 7,000 / 10,500 = 66.7%.

CAGR = (17,500 / 10,500)^(1/5) − 1 = 10.8% per year. That 10.8% is the number you should compare against a 10-year bond or an index fund — not the 66.7% headline. If instead you had sold after just 2 years at $140/share ($14,000), total ROI would be 33.3% but CAGR would be 15.5% — a much faster compounding rate despite the smaller total gain.

Now compare two investments side by side: Investment A returned 80% over 8 years; Investment B returned 45% over 4 years. Raw ROI makes A look better. CAGR reveals B's true performance: A = 7.6%/year, B = 9.7%/year. Always use CAGR when comparing across time horizons.