How ROI and annualized return are calculated

Total return over the whole period:

ROI = (final − initial) / initial

Annualized (CAGR), the constant yearly rate that would produce the same result:

CAGR = (final / initial)^1/t − 1

Worked example. $1,000 growing to $2,000 over 10 years is +100% total, but only 7.18% a year. The two numbers describe the same outcome, and the annual one is what to compare against other investments.

This is a time-weighted return, valid only when no money was added or withdrawn along the way.

Educational content only, not financial advice. Results are estimates for learning purposes. Consult a qualified professional before making financial decisions.