The one number that tells you what your investment actually returned — geometric mean, not arithmetic average.
CAGR (Compound Annual Growth Rate) is the honest way to measure investment performance. Enter your beginning value, ending value, and years held to compute CAGR instantly — then compare against the S&P 500 long-run average (10%), bonds (4%), and inflation (3%). Or flip to Project mode: give a CAGR and time horizon and see where your money lands.
Direct answers to the most common questions, in plain language. Skim if you're in a hurry; dig deeper below.
Depends on the asset class. Equity: 8–15%. Bonds: 3–5%.
A CAGR that beats inflation (~3%) is the baseline for growing wealth in real terms. Equities historically deliver 8–12% nominal CAGR over long horizons. Beating the S&P 500's ~10% long-run average consistently is hard — most active managers don't. So 10–15% is good; above 20% over many years is exceptional and warrants scrutiny.
CAGR is the geometric mean. Average return is the arithmetic mean. CAGR is the honest one.
If an investment gains 50% in year 1 and loses 33% in year 2, the arithmetic average is +8.5% — but your money is back to zero. CAGR correctly computes 0%. The arithmetic mean ignores compounding and always flatters volatile returns. Use CAGR when you need to know what actually happened to a dollar.
CAGR = (Ending / Beginning)^(1/Years) − 1
Take the ratio of ending value to beginning value, raise it to the power of 1 divided by the number of years, then subtract 1. That's it. The formula smooths out year-to-year noise and tells you the steady rate that would produce the same outcome.
Real CAGR strips out inflation. Nominal includes it.
A 10% nominal CAGR during a 3% inflation environment is a 7% real CAGR — the actual increase in purchasing power. Always compare real CAGRs when judging investments across different time periods, because a 12% CAGR in the 1980s felt different than 12% today.
The mechanics in short answers — no jargon, no upsell.
Plug in beginning value, ending value, and years held. The formula (Ending/Beginning)^(1/n) − 1 gives you the single annualized rate that, if applied each year, would produce the exact same result — regardless of how bumpy the actual path was.
The arithmetic average of annual returns always overstates growth for volatile investments. CAGR is the geometric mean: it penalizes volatility correctly. A −50% year wipes out a +100% year. CAGR captures that. Arithmetic average pretends it didn't happen.
Subtract inflation (~3% historically) from your nominal CAGR to get real CAGR. A 10% nominal return during 6% inflation is a 4% real return — and that's the number that determines whether you're building wealth or running in place.
This tool plots your CAGR curve alongside the S&P 500 benchmark and inflation. The gap between curves compounds over time — small CAGR differences become enormous dollar differences at year 20 or 30.
Designed so anyone can model their situation in under a minute, with or without a finance background.
CAGR is the geometric mean — it correctly accounts for compounding and doesn't flatter volatile returns the way simple averages do.
Compare your actual or expected CAGR against the S&P 500 (~10%), bonds (~4%), and inflation (~3%) side by side, instantly.
Given your CAGR, see exactly where your money lands in 5, 10, or 20 years alongside what the same dollars would do in index funds.
Instantly see how many years it takes your money to double at the computed CAGR — no spreadsheet required.
Every result shows both nominal CAGR and real CAGR (after 3% inflation), so you know what your purchasing power is actually doing.
Know your target CAGR and time horizon? Flip the tool: enter a start value and project what you'll have at the end.
Everything you might ask before, during, or after using this tool.
CAGR stands for Compound Annual Growth Rate. It's the rate at which an investment would have grown if it grew at the same rate each year — a smoothed, annualized representation of actual growth. It's useful because real investments are volatile year-to-year, but investors need a single number to compare options.
Yes, they're the same calculation. "Annualized return" and "CAGR" both refer to the geometric mean rate of return. Some contexts use "annualized return" for time-weighted returns in portfolio attribution, but the underlying math is identical to CAGR.
Yes. If your ending value is lower than your beginning value, the CAGR will be negative. A negative CAGR means your investment lost value at a compounding annual rate. For example, going from $10,000 to $7,000 over 5 years is approximately −6.8% CAGR.
Divide 72 by your CAGR (as a percentage) to get the approximate number of years it takes to double your money. At 9% CAGR, your money doubles in roughly 8 years (72/9). It's a mental shortcut that works well between about 5% and 15%. Outside that range, use 69.3 or 70 for better precision.
CAGR misleads in a few scenarios: very short time windows (1–2 years) where luck dominates; periods that start at a market peak or trough (making a manager look artificially good or bad); leveraged or synthetic investments where the path of returns destroys value; and when comparing across different time periods with very different inflation environments. Always sanity-check CAGR with the underlying data.
CAGR assumes a single lump-sum investment at the start and a single lump-sum exit at the end. IRR (Internal Rate of Return) handles multiple cash flows in and out — contributions, dividends, partial withdrawals. If you made one investment and didn't touch it, CAGR and IRR will give the same answer. If you added or withdrew money over time, use IRR (or XIRR in a spreadsheet).
Only if you include dividends in your ending value. A total-return CAGR uses ending value = final price + all reinvested dividends. A price-only CAGR ignores dividends. For equities, total-return CAGR is the right number — dividends have historically contributed ~2 percentage points of the S&P 500's ~10% total return.
The S&P 500 has returned approximately 10–10.5% per year on a nominal total-return basis since 1926. After inflation (~3%), the real CAGR is roughly 7%. These are long-run averages and individual decades vary significantly — the 2000s delivered nearly 0% nominal and the 2010s delivered over 13%. The longer your holding period, the closer you're likely to get to the historical average.
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Say a fund manager pitches you this track record: Year 1: +100%. Year 2: −50%. Average annual return? +25%. That sounds great. But check your ending balance: $10,000 becomes $20,000 after year 1, then drops to $10,000 after year 2. CAGR = 0%.
This is the volatility drag problem. The arithmetic mean ignores the compounding sequence — it treats each year as independent. The geometric mean (CAGR) does not. Any time returns are volatile, CAGR will be lower than the arithmetic average. The more volatile, the wider the gap.
This is not an edge case. A 60/40 portfolio that alternates +20% and −10% years has an arithmetic mean of +5% but a CAGR of about 4.5%. For a 30-year investment, that 0.5% gap is massive. Always use CAGR when evaluating what actually happened to your money.
A 10% CAGR sounds good. But if inflation is running at 8%, your real return is just 2% — you're barely keeping pace with the cost of living. Nominal CAGR tells you how many dollars you have; real CAGR tells you how much stuff those dollars can buy.
The standard approximation is simple: Real CAGR ≈ Nominal CAGR − Inflation Rate. The precise formula is (1 + nominal) / (1 + inflation) − 1, which gives you the same ballpark. For most analysis, the approximation is fine.
When comparing investments across different time periods, use real CAGRs. A 15% CAGR in the 1980s, when inflation averaged 6%, was a 9% real return. A 12% CAGR in the 2010s, when inflation averaged 2%, was a 10% real return. The 1980s number looks bigger but the 2010s investment actually built more purchasing power.
CAGR is only as honest as your choice of start and end dates. Any manager who cherry-picks a low trough as the start date and a high peak as the end date can manufacture a flattering CAGR. Always ask: why these specific dates? Is the period representative of a full market cycle?
Very short windows — anything under 3 years — carry too much noise. A 40% CAGR over one year is almost certainly luck, not skill. CAGR is most reliable over 5-year-plus windows that include at least one market downturn.
Leveraged products are another trap. A 2x leveraged S&P 500 ETF does not produce 2x the CAGR of the S&P 500. Volatility drag eats the difference. The daily rebalancing mechanism in leveraged ETFs compounds your losses in choppy markets, so even if the index ends flat, you can lose money.
Divide 72 by your CAGR to get the years to double. At 6%, money doubles in 12 years. At 12%, in 6 years. At 4%, in 18 years. Simple, fast, and accurate enough for most mental math between 5% and 15%.
The magic of this: it makes the cost of a lower CAGR visceral. The difference between 8% and 10% is not just 2 percentage points — it's the difference between a 9-year doubling time and a 7.2-year doubling time. Over 36 years, the 10% investment doubles four times while the 8% investment doubles three times. Four doublings from $10,000 is $160,000. Three doublings is $80,000. That 2 percentage point difference costs you $80,000.
For rates outside the 5–15% range, use 69.3 (the natural log of 2 × 100) for higher precision. The approximation degrades at extremes.
The forward projection in this calculator shows what your money does if the past CAGR persists. This is not a forecast — it's a "what if the trend holds" scenario. In reality, regression to the mean is powerful: hot streaks cool down, laggards recover, and the long-run average gravitates back toward economic fundamentals.
That said, the benchmark comparison is genuinely useful. If your investment has a 7% CAGR and the S&P 500 has delivered 10% historically, the projection shows the growing dollar gap between staying the course and having simply bought the index. Over 20 years, this gap is often six figures even for modest portfolios.
The inflation line is the most important reality check. If your projected investment value is barely outpacing inflation, you're working hard for purchasing power that never materializes. Any serious investment plan targets a real CAGR of at least 4–5% — enough to meaningfully compound wealth after inflation and taxes.
Two short notes worth reading before you trust any number on this page.
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