Annual Return Calculator

The compound annual growth rate, or CAGR, is the constant yearly rate of return that would take an investment from its starting value to its ending value over a given period, assuming profits are reinvested and compound each year. It answers a deceptively tricky question: if your investment grew unevenly, what single steady annual rate would have produced the same result?

CAGR matters because raw total return can be misleading. An investment that doubled sounds impressive — but doubling over 3 years is a very different (and far better) outcome than doubling over 15 years. Total return ignores time; CAGR builds it in, expressing performance as an annualized figure you can compare directly across investments held for different periods, or against benchmarks like the stock market's long-run average.

The calculation takes the ratio of ending to starting value, raises it to the power of one divided by the number of years, and subtracts one. The result is a smoothed annual rate. It's important to understand that CAGR is a representational average, not a description of what happened each year — a portfolio that returned +30%, −10% and +12% in three years has a single CAGR that hides that volatility. CAGR tells you the net effect, not the bumpy path.

This smoothing is both CAGR's strength and its limitation. As a clean basis for comparison it's excellent, which is why it's widely used to report fund performance and business growth. But because it ignores volatility, two investments with the same CAGR can carry very different risk; one might have moved steadily while the other swung wildly. For a complete picture, CAGR is best paired with a measure of volatility or the actual year-by-year returns.

CAGR also assumes a single lump sum with no additions or withdrawals along the way. If you contributed or withdrew money over the period, a money-weighted return such as the internal rate of return (IRR) is more appropriate. For a straightforward buy-and-hold investment, though, CAGR is the standard, intuitive way to measure how fast your money actually grew. This calculator gives you both the headline total return and the annualized CAGR so you can judge performance accurately.