CAGR Calculator
Calculate the Compound Annual Growth Rate (CAGR) of your investments. CAGR shows the smoothed annual return over time, perfect for comparing investment performance.
Why Use This Calculator?
Standardized Investment Performance Measurement
CAGR shows true annual return smoothing out volatility. Investment grew from $10k to $20k in 7 years = 10.4% CAGR (not 14.3% simple average). Accounts for compound growth, provides apples-to-apples comparison across different investments and timeframes.
Compare Multiple Investments Accurately
Portfolio A: $50k to $80k in 5 years = 9.9% CAGR. Portfolio B: $30k to $55k in 5 years = 12.9% CAGR. Portfolio B outperformed despite smaller dollar gain. CAGR enables fair comparison regardless of starting amounts or time periods.
Account for Volatility in Real Returns
Stock returned +30%, -10%, +20%, +5%, +12% = 11.4% simple average but only 10.2% CAGR (actual compound return). CAGR reflects reality - what money actually grew to, not misleading arithmetic mean. Shows true wealth accumulation.
Project Future Value Based on Historical CAGR
Portfolio grew 8.5% CAGR over 10 years. Current $100k, project 20 more years at same CAGR = $492k future value. Use historical CAGR to forecast realistic growth (vs unrealistic straight-line projections). Helps retirement planning and goal setting.
Evaluate Investment Strategy Effectiveness
Active trading portfolio: 6.2% CAGR over 5 years. Buy-and-hold index: 9.8% CAGR same period. Strategy underperformed by 3.6% annually = $18k less on $100k (5 years). CAGR quantifies strategy success objectively.
Adjust for Inflation to See Real Growth
Investment CAGR 7%, inflation 3% = 4% real CAGR (actual buying power increase). Nominal $10k → $19.7k in 10 years (7%), but inflation-adjusted = $14.8k buying power (4% real). CAGR minus inflation shows true wealth growth.
Step-by-Step Guide
Enter Beginning Investment Value
Input starting portfolio value or initial investment. Bought mutual fund for $25,000? Enter $25,000. Include all initial capital but not future contributions (use different calculator for that). This is your Day 1 baseline.
Example:
Example: Initial $10,000 investment, starting portfolio $50,000, original $5,000
Input Ending Investment Value
Enter current or final portfolio value. Investment now worth $45,000? Enter $45,000. Use market value on specific end date. Don't include pending deposits/withdrawals. This shows where investment grew to over time period.
Example:
Example: Current value $18,000, ending value $75,000, sold for $22,500
Set Investment Time Period in Years
Enter years between beginning and ending value. Held 7.5 years? Enter 7.5. Formula: (End Date - Start Date) ÷ 365.25. Partial years matter - 5 years 6 months = 5.5, not 5. Precision improves CAGR accuracy.
Example:
Example: 10 years, 3.5 years, 15 years from 2009-2024
Calculate Compound Annual Growth Rate
System calculates CAGR using formula: (Ending Value / Beginning Value)^(1/Years) - 1. $10k to $18k in 6 years = (18000/10000)^(1/6) - 1 = 10.3% CAGR. This is annualized rate that compounds to actual end result.
Example:
Example: $10k → $18k / 6 years = 10.3% CAGR smooth annual growth
Review Total Return Percentage
Calculator shows cumulative return: (Ending - Beginning) / Beginning × 100. $10k to $18k = 80% total return. CAGR tells annual rate (10.3%), total return shows overall gain (80%). Both metrics important.
Example:
Example: 80% total return over 6 years = 10.3% annualized CAGR
Compare CAGR to Benchmark (S&P 500)
S&P 500 historical CAGR ~10% (1928-2024). Your 8.5% CAGR underperformed by 1.5% annually. Over 20 years, 1.5% gap = $47k less on $100k initial. Benchmark comparison reveals if beating or lagging market.
Example:
Example: Portfolio 7% vs S&P 10% = 3% annual underperformance
Adjust for Inflation to Get Real CAGR
Subtract average inflation (2-3% historically) from nominal CAGR. 9% CAGR - 2.5% inflation = 6.5% real CAGR. Real return shows actual purchasing power growth. $10k growing at 6.5% real maintains value after inflation.
Example:
Example: 8% nominal CAGR - 3% inflation = 5% real CAGR
Factor in Fees and Expenses
Mutual fund with 1% expense ratio? Reduce CAGR by 1% for true return. 10% gross CAGR - 1% fees = 9% net CAGR. $100k over 30 years: 10% = $1.74M, 9% = $1.33M. 1% fee costs $410k lifetime. Always calculate net CAGR.
Example:
Example: 11% gross return - 1.2% fees = 9.8% net CAGR to investor
Use CAGR to Project Future Values
Portfolio at $50k with 8% historical CAGR, project 15 more years: $50k × (1.08)^15 = $158,400. Use past CAGR cautiously for future - past performance doesn't guarantee future. Conservative estimates safer for planning.
Example:
Example: $50k at 8% CAGR for 15 years = $158,400 projected (not guaranteed)
Compare Investment Vehicles by CAGR
401k: 9.2% CAGR. Rental property: 11.5% CAGR. Taxable brokerage: 7.8% CAGR. Direct comparison shows rental outperformed by 2.3-3.7% annually. CAGR enables objective evaluation across asset classes and accounts.
Example:
Example: Stocks 10% CAGR beats bonds 4.5% CAGR by 5.5% annually
Expert Tips & Strategies
CAGR Ignores Volatility and Timing Risk
Two portfolios, same 8% CAGR: A grew steadily 8% yearly. B: +50%, -20%, +30%, -15%, +25%. Both 8% CAGR but B far riskier. CAGR doesn't show volatility pain. Use Sharpe ratio or standard deviation alongside CAGR to assess risk.
Don't Use CAGR for Portfolios With Ongoing Contributions
Adding $500/month to portfolio? Standard CAGR formula doesn't work - treats contributions as growth. Use money-weighted return (XIRR in Excel) instead. CAGR only accurate for lump-sum investments with no additions/withdrawals.
Longer Time Periods Provide More Reliable CAGR
1-year CAGR = 30% could be luck or timing. 20-year CAGR = 9.5% shows true strategy effectiveness. Minimum 5-year CAGR for meaningful comparison. Short-term CAGR misleading - long-term reveals genuine performance after market cycles.
Always Subtract Fees for True Investor CAGR
Advisor reports 10% CAGR but charges 1.5% fees + 0.5% fund expenses = 2% total drag. Your net CAGR = 8%. Over 30 years, $100k at 10% = $1.74M vs 8% = $1.01M. Fees cost $730k lifetime. Always calculate after-fee CAGR.
Adjust for Inflation to See Real Wealth Growth
Portfolio grew 7% CAGR but inflation averaged 3% = 4% real CAGR (actual buying power gain). $100k at 7% nominal = $387k in 20 years, but inflation-adjusted = $209k buying power. Real CAGR shows if truly getting wealthier.
Use CAGR to Identify When to Fire Financial Advisors
Advisor-managed account: 5.8% CAGR over 10 years. Vanguard S&P 500 index: 10.2% CAGR same period. Underperformance 4.4% annually = 43% less wealth. If advisor consistently trails index by 2%+, fire and switch to low-cost index funds.
Compare Your CAGR to Appropriate Benchmark
All stocks? Compare to S&P 500 (10% CAGR). 60/40 stocks/bonds? Compare to 60/40 portfolio (7-8% CAGR). International? Compare to MSCI World (8% CAGR). Wrong benchmark misleads - match comparison to actual asset allocation.
Calculate CAGR for Individual Positions to Find Winners/Losers
Stock A: 18% CAGR over 5 years. Stock B: 3% CAGR. Sell B, buy more A or different growth stock. Position-level CAGR identifies underperformers dragging down portfolio. Trim losers, let winners run. Review individual CAGR annually.
Common Mistakes to Avoid
✓ Better approach: Calculating returns +30%, -20%, +15% as simple average (8.3%) vs actual CAGR (5.4%). Simple average misleading - doesn't compound. $10k at 8.3% average = $12,683 but real result = $11,710 (5.4% CAGR). Always use CAGR for multi-year returns.
✓ Better approach: Calculating 9% CAGR without subtracting 1.5% advisor fee + 0.75% fund expenses = 2.25% drag. True CAGR = 6.75%, not 9%. $100k over 25 years: 9% = $862k, 6.75% = $547k. Ignoring fees overstates returns by $315k.
✓ Better approach: Depositing $500/month, using standard CAGR formula treats contributions as growth. Inflates apparent return. CAGR only works for lump sum investments. Use IRR (Internal Rate of Return) or XIRR function for portfolios with cash flows.
✓ Better approach: Calculating CAGR from market bottom (2009) to peak (2021) = 14% CAGR. Starting 2008 (crash) or ending 2024 = 8% CAGR. Cherry-picked dates mislead. Use full market cycles (10-20+ years) or consistent periods for honest comparison.
✓ Better approach: Portfolio averaged 12% CAGR last decade, assuming next decade same. Market conditions change - past performance doesn't guarantee future. Use conservative 7-8% for planning even if historical CAGR higher. Overestimating future return risks under-saving.
✓ Better approach: Aggressive stock portfolio 11% CAGR vs conservative bond portfolio 4% CAGR, concluding stocks always better. Ignores volatility and risk. Bonds dropped 1% max, stocks 40% during crashes. CAGR doesn't show risk - use risk-adjusted returns (Sharpe ratio).
✓ Better approach: Celebrating 6% CAGR without realizing inflation averaged 5% = 1% real return (buying power barely grew). Focus on real CAGR (nominal - inflation) not nominal. 6% sounds great but 1% real means nearly standing still vs inflation.
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Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.