Calculator Calculator App

Reviewed By David Chen, CFA — Senior Financial Analyst & Investment Strategist.

Use this calculator calculator app to accurately determine the annualized rate of return (CAGR) on your investments over a specific period.

Calculator Calculator App

Calculator Calculator App Formula

The core logic behind this calculator calculator app is based on the Compound Annual Growth Rate (CAGR) formula. It smoothes out the returns of an investment to help you understand the steady annual growth rate.

CAGR = ( EV / BV )^{1 / n} – 1

Source: Investopedia: Compound Annual Growth Rate Formula

Variables:

• EV (Ending Value): The value of the investment at the end of the period.
• BV (Beginning Value): The initial principal or starting value.
• n (Number of Years): The time duration of the investment in years.

Related Calculators

• Investment Growth Calculator
• Simple ROI Calculator
• Compound Interest Calculator
• Inflation Adjusted Return Tool

What is a Calculator Calculator App for Returns?

A calculator calculator app focused on returns (often called a CAGR calculator) is an essential financial tool used to determine the constant rate at which an investment would have grown if it had grown at a steady rate. In the volatile world of stocks and mutual funds, returns fluctuate wildly from year to year. This tool helps smooth out that volatility to give you a single “annualized” number.

Investors use this application to compare the performance of two different assets over varying time periods. By normalizing the data into an annual percentage, you can effectively compare a 5-year bond against a 3-year stock portfolio.

How to Calculate Calculator Calculator App (Example)

Let’s assume you bought stock worth $10,000, and 3 years later, you sold it for $14,500. Here is how you calculate the return manually:

1. Identify Values: Beginning Value = $10,000, Ending Value = $14,500, Years = 3.
2. Divide: Divide End Value by Beginning Value: $14,500 / $10,000 = 1.45.
3. Exponent: Raise the result to the power of one divided by years (1/3): 1.45^0.333 ≈ 1.1318.
4. Subtract: Subtract 1 from the result: 1.1318 – 1 = 0.1318.
5. Convert: Multiply by 100 to get the percentage: 13.18%.

Frequently Asked Questions (FAQ)

Why is annualized return better than simple return? Simple return does not account for the time period. A 20% return over 10 years is very poor compared to a 20% return over 1 year. This calculator calculator app adjusts for time to give a fair comparison.

Can the number of years be a decimal? Yes. If you held an investment for 18 months, you should enter 1.5 in the “Years” field to get an accurate result.

What if the result is negative? If the Final Value is less than the Initial Value, the calculator will show a negative percentage, indicating an annualized loss on your investment.

Does this include dividends? To include dividends, you must add the total value of dividends received to your “Final Investment Value” before calculating, or assume they were reinvested.