CAGR Calculator (Annualized Return)
Total return alone is misleading: doubling your money is excellent in three years and mediocre in thirty. CAGR — compound annual growth rate — collapses any holding period into one annualized rate, so you can compare a stock, a fund, and a savings account on equal terms. Enter what you started with, what it became, and how many years it took.
Annualized return (CAGR)
9.6%
Total return
150.0%
Growth multiple
2.50x
CAGR = (ending ÷ starting)^(1 ÷ years) − 1. It is the smoothed annual rate that turns the starting value into the ending value; it says nothing about the volatility of the path in between. Backward-looking; not a forecast.
Why CAGR beats total return
Total return ignores time, so it cannot compare investments held for different periods. CAGR answers a cleaner question: at what steady annual rate would the starting amount have to grow to reach the ending amount over the years held? That single rate lets you line up a 3-year double (≈26% CAGR) against a 10-year double (≈7% CAGR) and see which compounding was actually faster.
What CAGR hides
CAGR is a smoothed average, not the path. An investment that returned +40% then −20% then +15% can show the same CAGR as one that rose steadily — but the lived experience and the risk were completely different. Always read CAGR alongside volatility or drawdown; a high CAGR achieved through stomach-churning swings is not the same quality of return as a calm one.
How to use it
Use it to compare realized returns you already know (a position you sold, a fund's track record) rather than to project the future — past CAGR does not repeat on schedule. To compare two investments fairly, compute each one's CAGR over its own holding period and rank by the annualized rate, not the headline total gain.
FAQ
Is a higher CAGR always better?
Not on its own. A higher CAGR earned with far more volatility or a deeper drawdown may be a worse risk-adjusted outcome. Compare CAGR together with how bumpy the ride was, not in isolation.
Can I use CAGR to predict future returns?
No. CAGR is backward-looking — it describes what already happened. Past annualized returns do not recur on a fixed schedule, so treat CAGR as a comparison tool, not a forecast.
What years should I enter for a partial year?
Use the actual time held as a decimal — 18 months is 1.5 years, 9 months is 0.75. The formula works for any positive number of years, not just whole ones.