Investment return: How we calculate
Compare an investment’s opening and closing value after costs.
How we calculate
Total investment return (ROI) shows the result over the whole holding period; the compound annual growth rate (CAGR) is the equivalent constant annual rate. This model is only for one opening and one closing value with no interim cash flows.
What the figures mean
- Total return on investment (ROI)
Profit divided by the invested amount. The figure covers the selected period; it is not automatically an annual return.
Simple example: €100 invested and €20 profit give a total return of 20%.
- Constant compounded annual growth (CAGR)
The same compounded yearly rate that would connect the starting and ending amounts. It does not describe fluctuations or additional contributions during the period.
Simple example: €100 growing to €121 over two years corresponds to 10% compounded each year.
Worked example
Example: buy for €10,000 with a €50 fee and sell three years later for €15,000 with a €50 fee. Initial outlay is €10,050, net proceeds are €14,950 and profit is €4,900. Total return is 4,900 / 10,050 ≈ 48.76%; annual return raises the final-to-initial ratio to the power 1/3. Annual return = ((14,950 / 10,050)^(1/3) − 1) × 100 ≈ 14.15%.
Annualisation assumes one initial and one final cash flow with no interim contributions, distributions or taxes. Use dated XIRR for multiple cash flows; compare investments over different durations carefully.