In Short
CAGR is the steady yearly rate that turns a starting value into an ending value: (end ÷ start)^(1 ÷ years) − 1. $10,000 that grows to $25,000 in 8 years is a 150% total return, or 12.14% a year. When you add money along the way, CAGR counts your deposits as growth, so the money-weighted return (IRR) is the fairer measure: $50,000 plus $5,000 a year that ends at $120,000 after 10 years shows a 9.15% CAGR but earned only 2.5% a year.
How to Use the Investment Return (CAGR) Calculator
- Enter the starting value (or what you paid) and the ending value (or what you sold for).
- Enter the number of years, or switch to dates and enter the start and end month and year.
- Optionally add money put in or taken out each year to see the money-weighted return.
- Or tap Say It All: “I invested 10,000 and it grew to 25,000 over 8 years.”
The Formula
CAGR smooths the path into one steady yearly rate. The money-weighted return (internal rate of return) finds the one rate that makes the starting value plus every deposit and withdrawal, each grown for its own time, equal the ending value [1].
- Total return = (ending value − starting value) ÷ starting value
- CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1
- Money-weighted return r solves: start × (1 + r)^T + Σ flow × (1 + r)^(T − t) = ending value
- Years between dates = (months between them) ÷ 12
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| A simple gain | $10,000 → $25,000 over 8 years | CAGR 12.14% · total return 150% |
| Adding money each year | $50,000 → $120,000 over 10 years, $5,000 added yearly | CAGR 9.15%, but money-weighted return 2.5% (gain $20,000) |
| Withdrawals hide a flat result | $200,000 → $150,000 over 5 years, $10,000 taken out yearly | CAGR −5.59%, money-weighted return 0% |
| A loss | $100,000 → $80,000 over 3 years | CAGR −7.17% · total return −20% |
| By dates | $20,000 in Jan 2018 → $41,000 in Jul 2026 (8.5 years) | CAGR 8.81% |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
What Is CAGR?
The compound annual growth rate is the single yearly rate that would take the starting value to the ending value if growth were perfectly steady. Real returns jump around from year to year; CAGR is the smooth line through them. It lets you compare investments held for different lengths of time.
An annual return can be worked out in many ways [1]. CAGR compounds: 12.14% a year for 8 years turns $10,000 into $25,000, while simply dividing the 150% total return by 8 (18.75%) would overstate it.
What Is the Difference Between CAGR and Money-Weighted Return?
CAGR looks only at the start and end values. If you added money along the way, those deposits show up as growth, and CAGR looks better than what your money really earned. Withdrawals do the opposite and make CAGR look worse.
The money-weighted return, also called the internal rate of return (IRR), counts every deposit and withdrawal at the time it happened. It answers the question: what yearly rate did my money actually earn? This calculator assumes flows at the end of each full year.
Does a Good Past Return Mean a Good Future Return?
No. A fund that did well one year can do average or poorly the next, so past performance is not a reliable guide to future results [2]. Use the calculator to measure what happened, not to predict what will.
Frequently Asked Questions
How do I calculate my average annual return?
Divide the ending value by the starting value, raise it to the power of 1 ÷ years, and subtract 1. $10,000 to $25,000 in 8 years: (2.5)^(1/8) − 1 = 12.14% a year.
What is a good CAGR?
It depends on the investment and its risk. Compare a CAGR with the return of similar investments over the same period, after fees and inflation. Past returns don't predict future ones [2].
Why is my CAGR higher than what I earned?
If you added money along the way, CAGR treats your deposits as growth. The money-weighted return (IRR) separates them: $50,000 plus $5,000 a year ending at $120,000 after 10 years is a 9.15% CAGR but only a 2.5% money-weighted return.
Can CAGR be negative?
Yes. $100,000 that falls to $80,000 over 3 years has a CAGR of −7.17%.
Can I use dates instead of years?
Yes. Switch the time period to dates and enter the start and end month and year. January 2018 to July 2026 is 8.5 years.
Sources
- Annual Return (glossary) — U.S. Securities and Exchange Commission (Investor.gov)
- Mutual Funds, Past Performance (glossary) — U.S. Securities and Exchange Commission (Investor.gov)
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.