Average annual return calculator

This is an estimate for information only. It is not financial or investment advice.

Result

Fill in the fields to see your result.

How it works

The compound annual growth rate (CAGR) is the single constant yearly rate that would take the starting value to the ending value over the given period, smoothing away every up and down year in between.

It is the standard way to compare investments held over different lengths of time, or to compare an investment against a benchmark index.

Formulas used

CAGR

CAGR = (End ÷ Start)^(1 ÷ years) − 1

Worked examples

A five-year investment

$10,000 growing to $16,000 over 5 years is a 60% total return, but only a 9.86% annualized (CAGR) return.

A short, sharp gain

$5,000 growing to $6,000 in just 8 months is a 20% total return, but annualizes to about 31.4%.

Assumptions and limits

Growth is assumed smooth and constant for the chart, even though real returns vary year to year.
No additional deposits or withdrawals occurred between the start and end values.
No taxes or fees are subtracted from the values entered.

Frequently asked questions

Why is CAGR lower than total return divided by years?

Because compounding is multiplicative, not additive — dividing the total return by the number of years overstates the true annual rate whenever more than one year is involved.

Does CAGR show how bumpy the ride was?

No — two investments with wildly different year-to-year volatility can share the same CAGR if they start and end at the same values. CAGR hides risk, it does not measure it.

Can the ending value be lower than the starting value?

Yes — enter an ending value below the starting value to get a negative annualized return, representing an average yearly loss.

Is this the same as a mutual fund's stated return?

Funds usually publish this exact figure, sometimes labelled "annualized return" — this calculator lets you verify it from the fund's own start and end values.

Updated 2026-08-31

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