Find the steady annual growth rate that takes an investment from its beginning value to its ending value over a given time period. CAGR smooths out volatility to show the average annual return.
Compound Annual Growth Rate (CAGR) is the single most useful number for comparing investments over time. It answers: "If this investment had grown at exactly the same rate every year, what would that rate be?" It smooths out the messy reality of actual year-by-year returns — up 30%, down 15%, up 8%, flat, up 22% — into a single comparable annualized number.
Why this matters: a portfolio that goes from $10,000 to $25,000 over 5 years has a 150% total return. That sounds impressive, but the equivalent steady annual rate is 20.1% per year. Quoting "150% total return" is technically correct but misleading for comparing to other periods or assets. CAGR gives you the apples-to-apples view: 20.1% per year is what you'd need from a savings account to match the same outcome.
CAGR is different from a simple average return, and the difference can be substantial. A portfolio that returns +50% in year 1 and −50% in year 2 has an arithmetic average of 0%, but its actual ending value is 75% of the starting value — for a CAGR of about −13% per year. The arithmetic average overstates the real growth because it doesn't account for the compounding effect of losses on a now-smaller base. CAGR is always less than or equal to the arithmetic average, and the gap widens with volatility.
This calculator takes a beginning value, ending value, and time period and returns the CAGR — the steady annual rate that connects the two. It works for any investment with a clear start and end value: a stock, a portfolio, a real estate purchase, a business.
Hypothetical $10,000 invested in an S&P 500 index fund in 2003. Worth approximately $63,000 by end of 2023 (with dividends reinvested). CAGR = (63,000 / 10,000)^(1/20) − 1 = 6.3^0.05 − 1 ≈ 9.6% per year Roughly matching the long-run average for U.S. large-cap equities, which has been around 10% nominal over many decades. The actual year-by-year experience: some years up 30%, some down 35% — but the steady-rate equivalent is 9.6%.
Home purchased for $250,000 in 2015. Worth $385,000 in 2024. CAGR = (385,000 / 250,000)^(1/9) − 1 = 1.54^0.111 − 1 ≈ 4.9% per year Slightly above the long-run national average of 3–4% — typical for a moderate-growth area in a strong housing decade. (This ignores transaction costs, financing costs, taxes, maintenance, and the tax-free imputed rent — full real estate analysis is more complex.)
Stock purchased for $20,000 in 2018. Worth $14,000 in 2024. CAGR = (14,000 / 20,000)^(1/6) − 1 = 0.7^0.167 − 1 ≈ −5.8% per year A loss of about 5.8% per year compounded — losing roughly a third of the principal over six years. CAGR is negative when ending value is lower than beginning value. Useful for comparing how badly different losing investments performed.
Use this calculator any time you want to express a multi-year investment outcome as a single annualized number — for comparing two investments, for evaluating a fund or strategy, for reporting returns to yourself or others, or for projecting forward to a future value.
It's the right tool when there's a clear single beginning value and a clear single ending value, with no major contributions or withdrawals in between. For investments with ongoing contributions (like a 401(k) or DCA savings plan), use the IRR calculator instead — IRR handles irregular cash flows correctly while CAGR cannot.
Pair this calculator with the compound-interest calculator (which projects forward from a known starting value at a known rate — the inverse of CAGR's direction), the investment-returns calculator (multi-period scenarios), and the ROI calculator (total-return, not annualized).
It's less useful for very short periods (a 6-month return annualized makes the result look misleadingly strong or weak) and for highly volatile assets where one outlier year dominates the calculation. Always pair short-period CAGRs with context about volatility and the assumptions baked in.
A common reporting trap: published "average annual return" figures from mutual funds may show either arithmetic average (higher) or geometric average / CAGR (lower). Always confirm which is being shown. Regulated marketing materials usually require CAGR; investor newsletters often use the higher arithmetic figure.
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CAGR
20.11%
Total Return
$15,000
Total Return %
150.0%