Calculate the annualised rate of return (CAGR) from an investment's start value, end value, and holding period. Use it to test different inputs quickly, compare outcomes, and understand the main factors behind the result before moving on to related tools or deeper guidance.
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Investment Analysis
Convert a total investment return over any holding period into an equivalent compound annual growth rate (CAGR). This makes returns over different time periods directly comparable.
CAGR is the single constant annual rate that would produce the observed total return if returns compounded smoothly every year. It smooths out the volatility of actual year-by-year returns into one representative number.
A 150% total return over 5 years equates to a CAGR of about 20.1% — meaning 20.1% compounded annually for 5 years would turn your starting value into 2.5×.
Geometric mean return.
CAGR = (End / Start)^(1/t) − 1
End = ending value, Start = starting value, t = holding period in years.
CAGR ignores volatility — a smooth 20% CAGR could mask wild swings. Does not account for interim cash flows (deposits, withdrawals). For portfolios with cash flows, use money-weighted return (IRR) instead.
Frequently asked questions
CAGR is a geometric mean; average return is arithmetic. If an investment goes +50% then −33%, the arithmetic average is +8.5% but the CAGR is 0% (you ended where you started). CAGR is more accurate for measuring actual wealth growth.
Yes, but be cautious. Annualising a 3-month return of 10% gives a CAGR of about 46%, which may be misleading if the short-term performance isn’t sustainable.
Only if you include reinvested dividends in the ending value. For total return CAGR, add all income received to the end value before calculating.
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