Return Calculator

What is investment return?

Return measures the profit or loss generated by an investment relative to invested capital. There are several indicators to measure it, each useful in different situations.

Indicators calculated by this tool

• ROI (Return on Investment): percentage gain on invested capital. Formula: (Final value − Capital) / Capital × 100. The simplest indicator.
• CAGR (Compound Annual Growth Rate): compound annual growth rate. Shows how much the investment has grown each year on average. Formula: (Final value / Initial value)^(1/n) − 1. The most useful indicator for comparing investments of different durations.
• Multiplier: how many times the invested capital has multiplied. A 2× multiplier means the money has doubled.

When to use CAGR?

CAGR is especially useful when you want to compare the performance of investments with different time horizons. For example, if one investment has had an ROI of 80% over 5 years and another 60% over 3 years, CAGR lets you know which has had a better annual performance.

A CAGR of 7% per year is historically considered a reasonable reference for globally diversified markets, although past returns do not guarantee future performance.

How ROI, CAGR and the multiplier are calculated

All three indicators start from the same data —invested capital, final value and years— but answer different questions:

Example: from €10,000 to €18,000 in 6 years

Suppose you invest €10,000 and after 6 years your investment is worth €18,000. The ROI is 80% (you gained €8,000 on €10,000) and the multiplier is 1.8×. But the most useful figure for comparison is the CAGR: around 10.3% per year. That 10.3% is what you can truly compare with another investment that, say, returned 60% in 3 years (CAGR ≈ 16.9% per year) and discover the second was more profitable despite a lower total ROI.

Common mistakes when measuring returns

• Confusing total return with annual return. 80% "sounds" huge, but over 10 years it equals about 6% per year. Always compare using CAGR.
• Ignoring fees and taxes. Net return is what you actually keep. A fund charging 2% annually can eat a large part of your long-term return.
• Forgetting inflation. A 3% return with 3% inflation is 0% in real terms: your purchasing power has not grown.
• Comparing different time frames without annualizing. Two investments are only comparable when you look at their annualized return (CAGR), not their gross gain.

Frequently asked questions about returns

What is the difference between ROI and CAGR?

ROI measures total gain as a percentage, without accounting for how much time has passed. CAGR turns that gain into a compound annual rate, allowing a fair comparison of investments with different durations. For investment decisions, CAGR is usually more informative.

What counts as a good annual return?

It depends on the risk taken. As a historical reference, global equity markets have returned around 7-10% nominal per year over the long term, conservative fixed income 2-4%, and liquid savings below that. Much higher returns usually imply much higher risk.

Does past performance guarantee future returns?

No. Past returns are indicative, but markets are volatile and there is no guarantee they will repeat. That is why it is wise to diversify, invest for the long term and adjust expectations to your risk profile.

How does compound interest affect returns?

When you reinvest profits, they in turn generate new profits. CAGR already assumes this reinvestment: it reflects compound growth year by year, not a simple arithmetic average.

Can I calculate the return on an investment I have not sold yet?

Yes. Use the current market value as the "final value". You will get the latent or unrealized return, useful to assess how your investment is doing, although it only materializes when you sell.