Annualized Rate of Return Calculator (CAGR)
Find the compound annual growth rate (CAGR) of any investment: enter the beginning value, ending value and the number of years held, and the calculator returns the single steady annual rate that would have produced the same result — along with the total return and a growth curve.
yrs
Compound annual growth rate — the steady per-year rate that produces the same result
- 1
Total return ratio
18,000 ÷ 10,000 = 1.8 - 2
CAGR exponent
1 ÷ 6 yrs = 0.1667Taking the n-th root of the ratio distributes the total gain evenly across each year. - 3
Growth factor (1 + CAGR)
1.8 ^ 0.1667 = 1.102924 - 4
CAGR
(1.102924 − 1) × 100 = 10.29
How does this calculator work?
CAGR = (Ending ÷ Beginning)^(1 ÷ Years) − 1. It is the single constant annual rate that transforms the beginning value into the ending value through compounding. Example: $10,000 → $18,000 in 6 years gives CAGR = (1.8)^(1/6) − 1 ≈ 10.3% per year. Use it to compare investments of different lengths on an equal basis.
Formula
How this is calculated
Real investments do not grow by the same dollar amount each year — they compound. A 10% gain on $10,000 produces $1,000, but the same 10% on the resulting $11,000 produces $1,100. The compound annual growth rate (CAGR) captures this by answering: "What single annual percentage, applied repeatedly with compounding, turns the beginning value into the ending value over the given number of years?"
The formula is CAGR = (Ending ÷ Beginning)^(1 ÷ Years) − 1. It is derived by solving the compound interest equation for the rate. CAGR is also called the "geometric average" or "annualized return" and is used to compare investments with different holding periods on an equal footing — two funds that both started at $10,000 are directly comparable once you know each one's CAGR, regardless of when you bought them.
Caveats: CAGR smooths over volatility — an investment that halved then quadrupled shows a high CAGR even though the ride was extreme. It also ignores interim cash flows (dividends, additional contributions) which are handled by the IRR (internal rate of return) instead. CAGR is best understood as a benchmark for comparing compounding performance, not as a guarantee of future results.
Frequently asked questions
The average (arithmetic mean) of annual returns, e.g. (+50% then −33%) averages to +8.5% — yet the actual result is break-even ($1 → $1.50 → $1.00). CAGR is the geometric mean: it reflects the actual compounded outcome and is always less than or equal to the arithmetic average when returns vary.
Yes — if the ending value is below the beginning value (a loss), the formula still works and returns a negative CAGR. For example, $10,000 falling to $7,000 over 5 years gives CAGR = (0.7)^(0.2) − 1 ≈ −6.9% per year.
Only if you incorporate them into the ending value. For a total-return comparison, use an ending value that includes dividends reinvested. For portfolios with ongoing deposits or withdrawals, use IRR (internal rate of return) instead — CAGR is only accurate for a single lump-sum investment held without additions or withdrawals.
Also known as
TG we-Calculate Editorial Team. (2026). Annualized Rate of Return Calculator (CAGR) [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/annualized-rate-of-return-calculator
TG we-Calculate Editorial Team. "Annualized Rate of Return Calculator (CAGR)." TG we-Calculate. 2026. https://we-calculate.com/calculator/annualized-rate-of-return-calculator.
TG we-Calculate Editorial Team, "Annualized Rate of Return Calculator (CAGR)," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/annualized-rate-of-return-calculator
@misc{wecalculate_annualized_rate_of_return_calculator, title = {Annualized Rate of Return Calculator (CAGR)}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/annualized-rate-of-return-calculator}}, year = {2026}, note = {TG we-Calculate} }
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