Investment Return Calculator

Understanding Investment Returns

Two metrics matter most when evaluating investment performance: Total Return (ROI) and CAGR (Compound Annual Growth Rate).

ROI vs. CAGR

ROI tells you the total percentage gain: (Final − Initial) / Initial × 100. Simple, but misleading for comparing investments over different time periods.

CAGR tells you the smoothed annual return, as if your investment grew at a constant rate each year. This is the go-to metric for comparing investments: CAGR = (Final/Initial)^(1/years) − 1.

Example: An investment that doubles in 5 years has a 100% ROI but only a 14.87% CAGR.

Historical Market Benchmarks

• S&P 500: ~10.2% annualized (1928–2024), ~7% after inflation
• US Total Bond Market: ~4–5% annualized
• Gold: ~7.3% annualized over past 20 years
• Real Estate (national avg.): ~4.4% annualized appreciation

Why CAGR Can Be Misleading

CAGR assumes smooth compounding. In reality, markets are volatile. A fund might drop 30% one year and rise 50% the next — the CAGR looks fine, but the lived experience is nerve-wracking. Always consider volatility alongside return.

The Impact of Fees

A 1% annual fee doesn't sound like much. But on a $100,000 investment at 8% for 30 years, a 1% fee costs you ~$100,000 in lost returns. Always calculate expense ratios when comparing funds — even 0.5% matters significantly over decades.