Quick Answer

An investment of $10,000 that grows to $18,000 over 5 years has an estimated total return of 80% and an estimated annualized return (CAGR) of approximately 12.47%.

Initial Investment ($)

Final Value ($)

Investment Period (years)

Common Examples

Input	Result
$10,000 initial, $18,000 final, 5 years	Estimated 80% total return, 12.47% CAGR
$5,000 initial, $12,000 final, 7 years	Estimated 140% total return, 13.31% CAGR
$50,000 initial, $75,000 final, 3 years	Estimated 50% total return, 14.47% CAGR
$20,000 initial, $15,000 final, 2 years	Estimated -25% total return, -13.40% CAGR
$100,000 initial, $250,000 final, 10 years	Estimated 150% total return, 9.60% CAGR

How It Works

This calculator uses the Compound Annual Growth Rate (CAGR) formula to estimate annualized investment returns:

CAGR = (FV / PV)^(1/n) - 1

Where:

• FV = final value of the investment
• PV = initial value (purchase price or starting balance)
• n = number of years the investment was held

Additional metrics derived from the inputs:

• Capital Gain/Loss = Final Value - Initial Investment
• Total Return % = (Capital Gain / Initial Investment) x 100
• Annualized Return = CAGR as a percentage

CAGR is particularly useful because it represents the constant annual rate that, when compounded over the investment period, would produce the same total growth. Unlike simple average returns, CAGR accounts for the compounding effect and gives a more accurate picture of annual performance.

For investments that lost value, both the total return and CAGR will be negative, indicating the annualized rate of decline.

Worked Example

For an investment of $10,000 that grows to $18,000 over 5 years:

Capital gain = $18,000 - $10,000 = $8,000. Total return = $8,000 / $10,000 x 100 = 80%. CAGR = ($18,000 / $10,000)^(1/5) - 1 = (1.8)^0.2 - 1 = 1.1247 - 1 = 0.1247, or approximately 12.47% per year.

To verify: $10,000 x (1.1247)^5 = $10,000 x 1.8 = $18,000. The annualized return of 12.47% compounded over 5 years produces the exact same final value.

For a loss example: $20,000 invested that becomes $15,000 over 2 years. Total return = -25%. CAGR = ($15,000 / $20,000)^(1/2) - 1 = (0.75)^0.5 - 1 = 0.8660 - 1 = -0.1340, or approximately -13.40% per year.

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Frequently Asked Questions

What is CAGR?

CAGR stands for Compound Annual Growth Rate. It is the constant annual rate of return that, when compounded over the investment period, would take the initial value to the final value. CAGR smooths out the effect of year-to-year volatility and provides a single annualized measure of investment performance.

How is CAGR different from average annual return?

A simple average return adds up each year's return and divides by the number of years. CAGR accounts for compounding, making it more accurate for measuring actual investment growth. For example, if an investment gains 50% one year and loses 50% the next, the simple average is 0%, but the actual result is a 25% loss. CAGR correctly reflects this.

Does this calculator account for dividends or contributions?

This calculator compares two values: the initial investment and the final value. If your final value includes reinvested dividends, the CAGR will reflect that growth. However, it does not handle additional contributions made during the investment period. For investments with ongoing contributions, a more detailed analysis is needed.

Can I use this for any type of investment?

Yes. The CAGR formula works for stocks, bonds, real estate, mutual funds, ETFs, or any asset where you know the starting value, ending value, and time period. It is a universal measure of annualized return.

What does a negative CAGR mean?

A negative CAGR indicates the investment lost value over the period. For example, a CAGR of -10% means the investment declined at an average compounded rate of 10% per year. The final value is lower than the initial investment.