Capital Growth Rate Calculator
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How to Calculate Capital Growth Rate
Capital growth, also known as capital appreciation, is the increase in the value of an asset or investment over time. It is measured by the difference between the current market value (or sale price) and the original purchase price.
The Basic Capital Growth Formula
To find the total percentage growth of an investment, use this simple formula:
The Annualized Capital Growth Rate (CAGR)
When comparing different investments, it is more effective to look at the Compound Annual Growth Rate (CAGR). This tells you how much the investment grew on average each year, accounting for compounding.
Practical Example
Imagine you purchased a rental property for $400,000. After 8 years, the property is valued at $650,000. Here is how you calculate the growth:
- Total Gain: $650,000 – $400,000 = $250,000
- Total Growth %: ($250,000 / $400,000) x 100 = 62.5%
- Annualized Growth: [($650,000 / $400,000)(1/8) – 1] x 100 = 6.25% per year
Why Tracking Capital Growth Matters
Understanding capital growth is essential for long-term wealth building. Unlike cash flow (like dividends or rent), capital growth represents the expansion of your underlying equity. High capital growth is typically the primary goal for investors in real estate and growth-oriented stocks.