How to Calculate Investment Returns (Total Return, CAGR Explained)

When you see that a stock "returned 4,432%," what does that actually mean? And how is it different from "26.5% annualized"? Here's a plain-language breakdown of the most common return metrics.

Total return

Total return measures the complete gain or loss from an investment, start to finish. The formula is simple:

If you invested $1,000 and it grew to $45,321, your total return is ((45321 - 1000) / 1000) x 100 = +4,432.1%.

Total return is useful for seeing the big picture, but it doesn't tell you how long it took. A 100% return in 2 years is very different from 100% in 20 years.

Annualized return (CAGR)

CAGR stands for Compound Annual Growth Rate. It tells you the equivalent yearly return, assuming the investment grew at a steady pace.

Using the same example: $1,000 growing to $45,321 over 16.2 years gives a CAGR of about 26.5% per year. That's the rate at which your money would need to compound annually to reach the same result.

CAGR is the better metric for comparing investments with different time periods. A stock with 500% total return over 5 years (CAGR ~43%) performed better annually than one with 1,000% over 20 years (CAGR ~13%).

What these numbers don't include

Most return calculations (including ours) use price return only. That means they don't account for:

• Dividends. Reinvesting dividends can significantly increase long-term returns, especially for companies like Coca-Cola or Johnson & Johnson.
• Taxes. Capital gains taxes reduce your actual take-home return.
• Trading fees. Less relevant today with zero-commission brokers, but historically significant.
• Inflation. $1,000 in 2000 had more purchasing power than $1,000 today.

Try it yourself

Our investment calculator computes both total return and CAGR for any company in our database, any start month, and any dollar amount. It also shows how the same investment in the S&P 500 would have performed.