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CAGR Calculator – Average Annual Return

The CAGR calculator finds the average annual return: either from a beginning value, ending value and number of years, or from the individual yearly returns of a fund or portfolio.

Example: Calculate from: beginning value, ending value and years · Beginning value 10,000 · Ending value 20,000 · Number of years 10 → Average annual return (CAGR, geometric): +7.18% per year. Source: Wolfram MathWorld – Compound interest, doubling time and rule of 72. Updated: .

e.g. amount invested or revenue in the first year
fractions allowed, e.g. 2.5
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Result

Average annual return (CAGR, geometric)
+7.18% per year
Total return
+100.00% (factor 2)
Doubling time
10 years (rule of 72: 10 years)
Year by year
YearValue
010,000.00
110,717.73
211,486.98
312,311.44
413,195.08
514,142.14
615,157.17
716,245.05
817,411.01
918,660.66
1020,000.00
Working
  • CAGR = (20,000.00 ÷ 10,000.00)^(1/10) − 1 = 2^(0.1) − 1 = +7.1773%
  • Check: 10,000.00 × 1.0717735^10 = 20,000.00
CAGR is a smoothed rate: the constant yearly return that would have produced the same ending value. Deposits and withdrawals along the way are not taken into account.

How it is calculated

The compound annual growth rate (CAGR) is (ending value ÷ beginning value)^(1 ÷ years) − 1. If $10,000 grows to $20,000 in 10 years, the CAGR is 2^(1/10) − 1 ≈ 7.18% per year – not 10%, as simply dividing 100% by 10 would suggest.

Why not just average the returns?

Returns compound, they don’t add. After +50% and −50% the arithmetic average is 0%, yet $100 has become $75. The correct average is the geometric mean: √(1.5 × 0.5) − 1 ≈ −13.4% per year. It is always less than or equal to the arithmetic mean, and the gap widens with volatility (roughly half the variance). That is why funds and indexes quote annualized – geometric – returns for multi-year periods.

Two ways to get the average return

Doubling time and the rule of 72

At a return r, money doubles after ln 2 ÷ ln(1 + r) years. The rule of 72 – divide 72 by the rate – gives almost the same answer: 7.2% → about 10 years. For regular contributions use the compound interest calculator, for one-off investments the ROI calculator, and to adjust past amounts for prices the inflation calculator.

Limits

CAGR says nothing about risk: two investments with the same CAGR may have swung very differently. Past returns do not predict future ones. For savings plans with ongoing contributions, the money-weighted return (internal rate of return) is the better measure.

Frequently asked questions

How do you calculate CAGR?

CAGR = (ending value ÷ beginning value)^(1 ÷ years) − 1. $5,000 growing to $8,000 in 8 years: 1.6^(1/8) − 1 ≈ 6.05% per year.

What is the difference between CAGR and average annual return?

CAGR is the geometric mean and reflects actual growth. The simple (arithmetic) average of yearly returns overstates it whenever returns fluctuate.

How do I calculate CAGR in Excel?

Use =(End/Start)^(1/Years)-1 or =RRI(Years, Start, End). From yearly returns: =GEOMEAN(1+range)-1 entered as an array formula.

Can CAGR be negative?

Yes, when the ending value is below the beginning value: 100 falling to 81 over 2 years is −10% per year.

What is a good CAGR?

It depends on the asset and period. Compare CAGRs over the same time span and alongside risk – a steady 6% can be preferable to a volatile 8%.

Sources and legal basis

As of:

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