Return on investment tells you how much you made in total. CAGR tells you how fast it grew each year. Put in what you invested, what it is worth now and how long you held it to see both.
ROI versus CAGR
ROI is the total gain divided by the amount you put in. It is simple, but it ignores time: an 80% return is excellent over two years and ordinary over fifteen. CAGR, the compound annual growth rate, spreads the growth evenly over the years you held the investment, so you can compare a business, a fund or a property on equal terms.
The formulas
- ROI (%) = (final value – amount invested) / amount invested x 100
- CAGR (%) = ((final value / amount invested) ^ (1 / years) – 1) x 100
- Doubling time (years) = ln(2) / ln(1 + CAGR)
Worked example
Suppose you invest Rs 500,000 and it grows to Rs 900,000 over 4 years. Your gain is Rs 400,000, so ROI is 80%. The CAGR is (1.8 ^ 0.25) – 1, which is about 15.83% a year. At that pace money doubles in roughly 4.7 years.
Limits to keep in mind
CAGR assumes smooth growth, but real returns move up and down. It also ignores extra deposits or withdrawals during the period, inflation, fees and tax. Use it to compare outcomes, not to predict the future.
Frequently asked questions
Can CAGR be negative?
Yes. If the final value is lower than the amount invested, the CAGR is negative and the result shows the yearly rate of decline.
Can I use months instead of years?
Enter the period as a decimal number of years, for example 2.5 for thirty months.
Is this the same as XIRR?
No. XIRR handles several cash flows on different dates. This tool handles a single investment and a single final value.
This calculator is provided for general information and planning only. It is not accounting, tax, legal or investment advice, and the results depend entirely on the numbers you enter. Please confirm important figures with a qualified professional.