How This Calculator Works
Three related but distinct metrics describe investment performance:
Total Return % = (Final Value − Initial Value) ÷ Initial Value × 100
Total Gain = Final Value − Initial Value
CAGR = (Final Value ÷ Initial Value)1/n − 1
Where n = number of years (can be fractional). Total return answers "how much did I make?" — it ignores time. CAGR answers "how fast did it compound?" — it normalizes for time so you can compare investments held over different horizons.
Why CAGR matters: an investment that doubles in 5 years has a 100% total return but a 14.9% CAGR. The same doubling over 10 years is still 100% total return but only 7.2% CAGR. Comparing total returns across different time periods is meaningless; comparing CAGRs is the standard approach.
For investments with multiple cash flows, use Internal Rate of Return (IRR), not CAGR.
CAGR assumes a single initial investment with no additions or withdrawals. If you added money along the way (like a 401(k) with monthly contributions), CAGR will understate true performance — use IRR or money-weighted return instead. Most brokerage statements report time-weighted return, which isolates investment performance from cash-flow timing.
Doubling time ≈ 72 ÷ CAGR (in %)
Sanity check: at 10% CAGR, money doubles in about 7.2 years. At 7%, about 10.3 years. The S&P 500 has compounded at about 10% nominal since 1926, doubling roughly every 7 years. After inflation (about 3%), real CAGR is about 7%, doubling every 10 years. Always compare your CAGR to a relevant benchmark — the S&P 500 for U.S. stocks, the Bloomberg U.S. Aggregate for bonds, or a 60/40 blend. Outperforming by 1%–2% annually over a decade is exceptional; underperforming by 2%+ suggests high fees, poor allocation, or emotional trading. When comparing investments, always match the time horizon: a 3-year CAGR of 25% (common in bull markets) is not sustainable, while a 20-year CAGR of 10% is exceptional. Short-period CAGRs are noisy and should not be extrapolated as reliable predictors of future performance.
When to Use This Calculator
Use this calculator when you want to:
- Evaluate the performance of a stock, fund, or property you bought and later sold
- Compare two investments held for different time periods on an apples-to-apples basis
- Benchmark your portfolio against the S&P 500 or other market index
- Decide whether to hold or sell — is the realized return worth the risk taken?
- Calculate the annualized return on a business investment or real estate flip
- Teach children or partners how compounding works over different horizons
- Calculate the annualized return on a home purchased years ago and recently sold
- Evaluate whether an actively managed fund justifies its fees versus an index fund
For ongoing investments with regular contributions (like a 401k or SIP), use our compound interest or retirement calculator instead — this tool is best for single buy-and-sell transactions where you know the start value, end value, and holding period. For investments with multiple cash flows (rental income, dividends, ongoing costs), use IRR rather than CAGR for an accurate return figure.
Example Calculation
You bought 200 shares of a stock at $45 per share on January 2, 2018 (total $9,000) and sold them on January 2, 2024 at $87 per share (total $17,400), six years later.
- Initial investment: $9,000
- Final value: $17,400
- Total gain: $17,400 − $9,000 = $8,400
- Total return: $8,400 ÷ $9,000 × 100 = 93.3%
- CAGR: (17,400 ÷ 9,000)1/6 − 1 = (1.933)0.1667 − 1 ≈ 11.6%
So you nearly doubled your money in six years, compounding at 11.6% per year — comfortably ahead of the S&P 500's long-run average of about 10%.
For comparison: the S&P 500 returned about 13.5% annualized over the same 2018–2024 window, so this investment slightly underperformed a passive index fund. A 10-year U.S. Treasury bought in 2018 yielded about 2.9% — far less, but with zero volatility. A savings account at 2% APY would have grown $9,000 to about $10,134 over 6 years — a $1,134 gain versus your $8,400 gain. This is why risk premiums exist: stocks return more than bonds, which return more than cash, but with correspondingly higher volatility. CAGR lets you compare them all on the same scale.
If you had instead invested the $9,000 in an S&P 500 index fund, you would have earned about 13.5% annualized over the same period — turning $9,000 into about $19,400, a gain of $10,400 versus your $8,400. The index fund would have beaten your individual stock pick with lower risk (diversification) and lower effort. This is why many financial advisors recommend passive index investing for most retail investors: beating the market over multi-year periods is extremely difficult, even for professionals, and individual stock picks carry concentrated risk that diversified funds do not.