ROI Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
ROI measures total gain relative to the start; CAGR converts beginning and ending value into an equivalent annual compound rate.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Calculate beginning and ending values.
- Find total ROI.
- Add holding period in years.
- Use CAGR for an annualized comparison.
Worked example
$10,000 growing to $15,000 is 50% total ROI; over three years CAGR is about 14.47%.
How to interpret the result
CAGR is useful for comparing periods but smooths volatility and does not show each year’s actual path.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Dividing ROI by years and calling it CAGR.
- Ignoring contributions or withdrawals.
- Treating CAGR as the actual return every year.
Frequently asked questions
Can ROI and CAGR both be positive?
Yes.
Why not divide ROI by years?
Compounded growth is nonlinear.
What if there are cash flows?
Simple beginning/end CAGR may not be appropriate.