Total return vs. annualized return
Total return is simply how much grew. Annualized return (CAGR) converts that into "what steady yearly compounding rate would produce the same result." To compare investments held for different lengths of time, you need the annualized figure — total return alone can't do it.
A return without a time frame tells you nothing
"I made 50%" means nothing on its own. 50% in one year is excellent; 50% over ten years works out to only about 4% a year, not far from a savings account. Gains are often quoted without the time frame for exactly this reason.
Losing 50% takes a 100% gain to undo
Returns aren't symmetric. Going from 1,000 to 500 is −50%, but getting back to 1,000 needs +100%. The bigger the loss, the more steeply the required recovery return climbs.
Fees, taxes, and inflation aren't included
This calculator works in pre-tax, nominal terms and does not account for trading fees. What you actually keep is less, and inflation erodes the real return further. It also won't be accurate if you added or withdrew money partway through.
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Frequently asked questions
QWhat's the difference between ROI and CAGR?
ROI is the total percentage change from start to end, regardless of how long it took. CAGR converts that same result into a single steady annual growth rate, which is the only way to fairly compare investments held for different lengths of time.
QWhy does the required recovery rate grow faster than the loss?
Because percentages are relative to a shrinking base. Losing 50% leaves half your money, and that smaller amount needs to double — a 100% gain — just to get back to where you started.