CAGR calculator: what an investment really returned each year
An investment that grew 80% sounds impressive, until you learn it took eight years. Total return doesn’t tell you how fast money grew, and a simple average can overstate it. The compound annual growth rate, or CAGR, gives the steady yearly rate that would take you from the starting value to the ending value, so you can compare investments held for different lengths of time.
Investment return (CAGR) calculator
- Average yearly return (CAGR)
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- Total return
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- Gain
- –
- After inflation (real CAGR)
- –
CAGR is the steady yearly rate that would turn the starting value into the ending value. It smooths over the ups and downs along the way and works for a single amount with no deposits or withdrawals in between; if you added or took out money, the result will be off. Taxes and fees are only included if they’re reflected in the ending value. Everything here runs in your browser; nothing you enter is stored or sent.
What this calculator can help you understand
- The average yearly return of an investment, compounded.
- The total return over the whole period.
- The real return after inflation.
When it’s useful
- When reviewing how an investment has done.
- When comparing investments held for different lengths of time.
- When checking a fund’s or advisor’s performance claims.
- When setting realistic return assumptions for other calculators.
Who it’s for
- Investors reviewing their accounts.
- Anyone comparing two investments or two periods.
- People evaluating a past decision, like a home or a business.
What to enter
| Input | What it means | Where to find it |
|---|---|---|
| Starting value | What the investment was worth at the start | An old statement |
| Ending value | What it’s worth now, including reinvested dividends | Your latest statement |
| Years held | Time between the two values | Statement dates |
| Inflation per year | Average inflation over the period | BLS CPI data, or an estimate |
How to use it
- Enter the starting and ending values.
- Enter how many years passed between them; fractions are fine.
- Optionally, enter average inflation for the period.
- Read the yearly return, the total return and the real return.
Understanding your results
- CAGR = (ending ÷ starting)^(1 ÷ years) − 1.
- Total return = ending ÷ starting − 1.
- Gain = ending value − starting value.
- Real CAGR = (1 + CAGR) ÷ (1 + inflation) − 1.
A worked example
Suppose $10,000 grew to $18,000 over 8 years, while inflation averaged 3%.
- Total return: 80.0%.
- CAGR: 7.62% a year. Check: $10,000 growing at 7.62% for 8 years reaches $18,000.
- Simple average: 10.00% a year, which overstates the compounded rate.
- Real return: about 4.49% a year after inflation.
- What it means: the investment grew purchasing power at a little under half the headline rate a simple average suggests.
Common mistakes
- Using a simple average. It overstates growth when returns compound.
- Ignoring deposits and withdrawals. CAGR only works for a single amount.
- Leaving out dividends.
- Comparing nominal and real returns.
- Treating past CAGR as a forecast.
What to do with your result
- Compare it with a low-cost index fund over the same period.
- Check whether fees are eating into returns with the investment fee calculator.
- Use a cautious return assumption in the compound interest calculator.
Limitations to keep in mind
CAGR summarizes growth between two points and says nothing about the path or the risk taken. It doesn’t account for contributions, withdrawals, taxes or fees unless they’re reflected in the values you enter. Past returns don’t predict future results. This isn’t investment advice.
Frequently asked questions
What is CAGR?
The compound annual growth rate is the constant yearly rate that would grow a starting value into an ending value over a number of years: (ending ÷ starting)^(1 ÷ years) − 1.
Why not just divide the total return by the years?
Because returns compound. In our example, an 80% gain over 8 years averages 10% a year by simple division, but the compounded rate is 7.62%.
Can CAGR hide volatility?
Yes. It describes only the start and end. An investment that rose 50% and then fell 50% has an average of 0.0%, but it ended at $7,500 from $10,000, a CAGR of -13.4%.
What if I added money along the way?
CAGR assumes a single amount with no deposits or withdrawals. With contributions, you need a money-weighted return (internal rate of return), which many brokerages report on statements.
What is a real return?
Your return after inflation: how much your purchasing power grew. It’s (1 + return) ÷ (1 + inflation) − 1.
Should the ending value include dividends?
Yes, if they were reinvested, or add the dividends you received. Leaving them out understates your return.
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This calculator gives estimates for illustration, based on the figures you enter and the assumptions described on this page. It isn’t financial, tax or legal advice, an offer, or a guarantee of any outcome.