How ROI and CAGR are calculated

ROI (Return on Investment) is your total percentage gain or loss: (Final Value − Initial Investment) / Initial Investment × 100. CAGR (Compound Annual Growth Rate) spreads that same return evenly across every year you held the investment, so you can fairly compare investments held for different lengths of time: ((Final / Initial)^(1/years) − 1) × 100.

How to use this investment calculator

1. Enter your initial investment amount.
2. Enter the final value of the investment.
3. Enter how long you held it, in years.
4. Click Calculate to see your gain, total ROI, and annualized CAGR.

See also our ROAS calculator if you’re measuring return on ad spend specifically rather than a general investment.

ROI vs. CAGR: which should you use?

ROI (Return on Investment) tells you your total percentage gain or loss over the entire time you held an investment, regardless of how long that was. CAGR (Compound Annual Growth Rate) normalizes that same return into an equivalent yearly rate, which makes it possible to fairly compare two investments held for different lengths of time — a 50% ROI over 2 years is a much stronger result than a 50% ROI over 10 years, and CAGR makes that difference explicit.

Factors that affect real returns

• Fees and expense ratios: Even a 1% annual fee can meaningfully erode long-term returns due to compounding.
• Taxes: Capital gains taxes on realized profits reduce your effective return compared to the raw ROI figure.
• Inflation: A nominal ROI figure can look strong while still representing a modest real (inflation-adjusted) return.

Tips for evaluating an investment

Compare CAGR rather than raw ROI when evaluating investments held for different durations. Factor in fees, taxes, and inflation to understand your real, take-home return rather than the headline number. For ad campaign returns specifically rather than general investments, see our ROAS calculator.

Expert insight: time in the market over timing the market

Followers of the Bogleheads philosophy, named for Vanguard founder John Bogle, argue that consistently trying to beat the market is largely futile, since most actively managed funds underperform simple low-cost index funds over the long run. Their advice for evaluating any investment: focus on minimizing fees and staying invested through market cycles, rather than chasing short-term returns.

Further reading: The S&P 500 Just Hit Its 25th Record High of 2026 — What That Actually Means for Your Portfolio

Related calculators

• Compound Interest Calculator
• 401(k) Retirement Calculator
• ROAS Calculator