Investment Return Calculator
Project investment returns over any time period. See how your investment grows with different rates and time horizons.
$10,000 growing to $18,000 over seven years is an 8.76% compound annual growth rate, not the 11.43% a simple average suggests — and it is 5.59% after 3% inflation.
Calculator
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How This Calculator Works
Investment growth uses compound interest:
FV = PV × (1 + r)^t
Where PV is present value, r is the annual return rate, and t is years.
Worked example
Using the defaults — $10,000 invested, growing to $18,000 over 7 years:
Compute the total multiple. $18,000 ÷ $10,000 = 1.8×. Your money grew 80% in total.
Annualise it. 1.8^(1/7) = 1.0876, so the compound annual growth rate is 8.76%. This is the single constant rate that would take $10,000 to $18,000 in seven years.
See why the simple average misleads. 80% total ÷ 7 years = 11.43%. That is the simple average, and it overstates the compounding rate by 2.67 percentage points. Only CAGR is usable in a projection, because only CAGR accounts for the fact that year two grows on year one's gains.
Subtract inflation to get the real return. At 3% inflation 7 years ago, $10,000 of then-purchasing-power is $12,297 today. So the real end value is $18,000 ÷ 1.231 = $14,636 in original purchasing power, and the real CAGR is 5.59%, not 8.76%.
Enter 10000, 18000 and 7 above to reproduce the 8.76% figure. Always compare a nominal return with a nominal benchmark and a real return with a real one.
CAGR versus simple average
The same total gain expressed as a simple average always overstates the compound rate, and the gap widens with the holding period.
| Holding period | Total return | Simple average | CAGR (true rate) |
|---|---|---|---|
| 3 years | 80% | 26.67% | 21.64% |
| 5 years | 80% | 16.00% | 12.47% |
| 7 years | 80% | 11.43% | 8.76% |
| 10 years | 80% | 8.00% | 6.05% |
| 20 years | 80% | 4.00% | 2.98% |
Every row ends at the same $18,000. Only the CAGR column can be used in a forward projection; the simple average is not a real annual return and should never be used for planning.
Common mistakes with this calculation
- Using the simple average as if it were the annual return. A fund that returns +50% then −50% has an arithmetic average of 0% but a real balance of $7,500 on a $10,000 start — a 25% loss. Volatility destroys returns, and only the geometric (compound) rate reflects that.
- Comparing a nominal return with a real benchmark. A 9% nominal return against a 3% inflation rate is about a 5.8% real return. Comparing the 9% figure directly to a real return series, or to a benchmark quoted in real terms, produces a meaningful error over long horizons.
- Ignoring the timing and size of the cash flows. CAGR assumes a single lump sum invested at the start with nothing added or removed. A portfolio with regular contributions has a money-weighted return that differs from the CAGR. Use IRR or XIRR for that case.
- Forgetting fees and taxes. A fund charging 1.2% a year on an 8.76% gross return delivers roughly 7.5% net. Over seven years that cost is about $1,000 on this example — and the drag compounds, so it grows with the horizon.
When this calculator does not apply
- CAGR assumes a single lump sum at the start, with no contributions, withdrawals or rebalancing.
- It says nothing about the path. Two investments with identical CAGRs can have completely different volatility and drawdown profiles.
- It is a backward-looking measure. A high historical CAGR does not imply a high future return.
- Expenses, taxes and transaction costs are not applied.
- It cannot be used for periods shorter than one year, because annualising a sub-year return produces a figure that cannot recur.
Frequently Asked Questions
What return rate should I use?
For a diversified stock portfolio, 7-10% is historically reasonable. For bonds, 3-5%. For savings accounts, 1-4%. Use a rate that matches your investment strategy.
Does this account for inflation?
No. To see real (inflation-adjusted) returns, subtract inflation (typically 2-3%) from your expected return rate.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full formula derivation.
- Compound Interest Calculator US Securities and Exchange Commission
- Mutual Fund and ETF Fees and Expenses US Securities and Exchange Commission
- Consumer Price Index US Bureau of Labor Statistics
- Investor Bulletins US Securities and Exchange Commission
- Financial Accounts of the United States Federal Reserve
Last reviewed .
Key takeaways
- $10,000 to $18,000 over seven years is an 8.76% CAGR, not an 11.43% simple average.
- Only the compound rate can be used forward. The simple average overstates the annual return.
- Subtract inflation to convert a nominal return into a real one — 8.76% nominal is 5.59% real at 3% inflation.
- Volatility reduces compound returns even when the average is unchanged.
- Fees compound against you exactly as returns compound for you.