Investment Rates Calculator

Investment Performance & Rate Calculator

CAGR

0%

Annualized Growth

Total Return

0%

Overall Efficiency

Net Gain/Loss

$0

Absolute Delta

function calculateInvestmentRate() { var start = parseFloat(document.getElementById('initialValue').value); var end = parseFloat(document.getElementById('finalValue').value); var time = parseFloat(document.getElementById('durationYears').value); if (isNaN(start) || isNaN(end) || isNaN(time) || start <= 0 || time = 0 ? "$" : "-$") + Math.abs(gain).toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('investmentResults').style.display = 'block'; }

Understanding Investment Rates

When assessing the performance of your capital, looking at the simple gain is often misleading. To truly understand how hard your money is working for you, you must evaluate the annualized growth rate, commonly referred to as the Compound Annual Growth Rate (CAGR).

What is CAGR?

The CAGR provides a "smoothed" annual rate of return. It represents the geometric progression ratio that provides a constant rate of return over the time period, assuming the profits were reinvested at the end of each year. Unlike a standard average, CAGR accounts for the compounding effect, making it the gold standard for comparing different asset classes like stocks, real estate, or private equity.

Total Return vs. Annualized Return

It is easy to get excited about a 50% total return. However, if it took 10 years to achieve that 50%, your annualized rate is significantly lower than if it took only 2 years.

• Total Return: Measures the total percentage change from start to finish.
• Annualized Rate: Tells you the efficiency of the investment per unit of time (years).

Example Calculation

Suppose you invested $5,000 in a tech fund, and after 4 years, your portfolio is worth $7,500.

1. Your Total Return is 50% (a $2,500 gain).
2. Using the formula [(7500 / 5000) ^ (1 / 4)] - 1, your CAGR is approximately 10.67%.

This allows you to compare this tech fund against a high-yield savings account or the S&P 500 average to see if the risk was worth the reward.

Why Duration Matters

Time is the most critical variable in the investment rate equation. Because of compounding, small differences in the annual rate can lead to massive differences in final wealth over long horizons. This calculator helps you isolate the time variable to see exactly how your assets are performing on a yearly basis, regardless of how long you have held them.