Investment Return Calculator
Calculate total return, CAGR and compare performance across different investment scenarios.
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Frequently Asked Questions
What is CAGR and why does it matter?
CAGR (Compound Annual Growth Rate) is the steady annual rate that would produce the same result as the actual investment over a multi-year period. It smooths out year-to-year volatility to show the true annual return. A $10,000 investment growing to $18,000 over 5 years has a CAGR of about 12.5%, regardless of how returns varied each year.
What is a good investment return?
The S and P 500 has averaged about 10% annually (7% real after inflation) over long periods. For context: savings accounts earn 4-5%, bonds 3-6%, real estate 8-12% total return, individual stocks vary widely. A real return (above inflation) of 5-7% is considered solid for a diversified long-term portfolio.
What is the difference between nominal and real return?
Nominal return is the raw percentage gain before adjusting for inflation. Real return = ((1 + nominal) / (1 + inflation) - 1). At 8% nominal with 3% inflation, real return is about 4.85%. Real return shows actual purchasing power gained. Long-term investors should focus on real returns to understand true wealth growth.