The Retro Calculator is a powerful financial tool designed to determine the annualized return (CAGR) of your investments over time, helping you compare different assets with varying durations.
Retro Calculator
Annualized Return (CAGR)
Retro Calculator Formula:
Where n is the number of years. Source: Investopedia – Compound Annual Growth Rate
Variables:
- Initial Investment: The amount of money you started with at the beginning of the period.
- Ending Value: The current value or the final balance of the investment.
- Years: The total duration of the investment in years (can include decimals).
What is Retro Calculator?
A retro calculator for annualized returns, often referred to as a CAGR calculator, is an essential tool for investors who need to understand the true geometric growth of their portfolio. Unlike a simple average return, the annualized return accounts for the effects of compounding, providing a much more accurate picture of performance.
By using a retro calculator, you can effectively compare the efficiency of a stock investment that lasted 3 years against a real estate investment that lasted 10 years. It normalizes growth into a yearly figure, making performance evaluation consistent and objective.
How to Calculate Retro Calculator (Example):
- Start with an Initial Investment of $5,000.
- Assume an Ending Value of $8,000 after 4 years.
- Divide the final value by the initial value: 8,000 / 5,000 = 1.6.
- Raise this result to the power of (1 / years): 1.6 ^ (1/4) ≈ 1.1247.
- Subtract 1 to get the decimal: 1.1247 – 1 = 0.1247.
- Multiply by 100 to get the percentage: 12.47%.
Related Calculators:
Frequently Asked Questions (FAQ):
Simple return measures total growth from start to finish. Annualized return shows what the growth would be if the investment grew at a steady rate every year, accounting for compounding.
Yes. If the ending value is lower than the initial investment, the retro calculator will display a negative percentage, indicating an annualized loss.
Average return can be misleading if there is high volatility. CAGR provides the single rate that would have taken an investment from its starting point to its ending point.
While it varies by asset class, a 7-10% annualized return is often considered strong for long-term stock market investments like the S&P 500.