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Average Return Calculator (CAGR)

Calculate the Compound Annual Growth Rate (CAGR) between a beginning and ending investment value over a number of years.

What is Average Return Calculator (CAGR)?

The Average Return Calculator computes the Compound Annual Growth Rate (CAGR) — the steady annual rate that would grow a beginning value to an ending value over a given number of years. CAGR smooths out volatility to give a single, comparable rate of return, making it the standard metric for evaluating and comparing investment performance.

How to use

  1. 1 Enter the beginning value of your investment.
  2. 2 Enter the ending value of your investment.
  3. 3 Enter the number of years between the two values.
  4. 4 The CAGR, total return percentage, and absolute gain appear instantly.
  5. 5 Use the CAGR to compare against benchmarks like the S&P 500 or inflation.

Formula

CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1. Total Return % = (Ending − Beginning) / Beginning × 100. Absolute Gain = Ending − Beginning.

Example calculation

Beginning value $20,000, ending value $45,000, 8 years: CAGR = (45000/20000)^(1/8) − 1 ≈ 10.66%. Total return: 125%. Absolute gain: $25,000.

Frequently asked questions

What is the difference between CAGR and average annual return?

Simple average return just averages annual percentage changes and can be misleading with volatile returns. CAGR uses the geometric mean and shows the actual constant growth rate that would produce the observed result — it's a more accurate measure of investment performance.

What is a good CAGR?

Context matters. The S&P 500 has historically averaged about 10% CAGR (7% after inflation). A CAGR above 15% is exceptional over long periods. For bonds or real estate, 4%–8% is typical. Always compare against a relevant benchmark.

Can CAGR be negative?

Yes. If the ending value is less than the beginning value, CAGR will be negative, representing an annualized loss. For example, going from $10,000 to $6,000 in 5 years is a CAGR of about −9.7%.

Does CAGR account for contributions or withdrawals?

No. CAGR only uses the start and end values. If you made additional contributions or took withdrawals during the period, CAGR will not accurately reflect portfolio performance. Use the money-weighted rate of return (IRR) in that case.

How is CAGR used in business?

CAGR is widely used to measure revenue growth, market size expansion, or user base growth over multi-year periods. It allows apples-to-apples comparison between companies or time periods regardless of the starting scale.