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Return on investment (ROI), profit, growth multiple, and the compound annual growth rate (CAGR) from an initial and final value.
ROI is the total gain over the whole period; CAGR is that same gain expressed as one steady rate per year.
Total ROI
150%
total gain over the whole period
CAGR (annualized)
20.11%
steady gain per year
Profit
1,500.00
Multiple
2.5×
In plain English
Turning 1,000.00 into 2,500.00 over 5 years is a 150% total return — the same as earning 20.11% every year, with each year's gain compounding on the last.Two different questions, two different answers:
ROI = (final − initial) / initial × 100 = (2,500.00 − 1,000.00) / 1,000.00 × 100 = 150%
CAGR = (final / initial)^(1 / years) − 1 = (2,500.00 / 1,000.00)^(1/5) − 1 = 20.11%
ROI just compares the two endpoints — it says nothing about how long the money was invested. CAGR fixes that: it's the single yearly rate that, compounded 5 times, grows 1,000.00 into exactly 2,500.00. That's why a 150% ROI over 5 years is only 20.11% a year — and why CAGR is the fair way to compare investments held for different lengths of time.
The green line is your 1,000.00 compounding at 20.11% a year until it reaches 2,500.00; the grey dashed line is the 1,000.00 you started with. The gap between them is your profit, and it widens each year as gains compound on earlier gains.
| Year | Value | Gain that year | Profit so far | ROI so far |
|---|---|---|---|---|
| 0 | 1,000.00 | — | 0.00 | 0% |
| 1 | 1,201.12 | +201.12 | 201.12 | 20.11% |
| 2 | 1,442.70 | +241.58 | 442.70 | 44.27% |
| 3 | 1,732.86 | +290.16 | 732.86 | 73.29% |
| 4 | 2,081.38 | +348.52 | 1,081.38 | 108.14% |
| 5 | 2,500.00 | +418.62 | 1,500.00 | 150% |
This is the smoothed CAGR path — the steady 20.11%-a-year line that lands on 2,500.00. A real investment zig-zags year to year; CAGR is the constant rate that produces the same start and end.
Total ROI (return on investment)
How much you made across the entire period, as a percent of what you put in. Example: 1,000.00 → 2,500.00 is a 150% return — you got back your 1,000.00 plus 150% on top.
CAGR (compound annual growth rate)
The one steady yearly rate that would grow your money from start to finish, with each year compounding on the last. Example: 150% over 5 years works out to 20.11% a year — the number to use when comparing investments held for different lengths of time.
Profit
The plain gain in money terms — final minus initial. Example: 2,500.00 − 1,000.00 = 1,500.00.
Multiple
How many times your money you ended up with. Example: 2,500.00 is 2.5× the 1,000.00 you started with.