Calculate the average annual return on your investments over a specified period. Understand your investment performance with CAGR and total return calculations.
You invest $10,000 in a diversified portfolio. After 5 years, it grows to $16,105.10.
CAGR = (16,105.10 ÷ 10,000)^(1÷5) − 1 = 10.00%
Your investment grew at an average annual rate of 10%, more than doubling your money in real terms over the period.
A property purchased for $250,000 is worth $350,000 after 8 years.
CAGR = (350,000 ÷ 250,000)^(1÷8) − 1 = 4.29%
The property appreciated at an average annual rate of 4.29%, representing solid long-term real estate growth.
A startup's annual revenue grows from $500,000 to $2,500,000 over 4 years.
CAGR = (2,500,000 ÷ 500,000)^(1÷4) − 1 = 49.53%
The business achieved extraordinary annualized growth of nearly 50%, quintupling revenue in four years.
You deposit $15,000 in a 529 college savings plan. After 18 years, it grows to $48,000.
CAGR = (48,000 ÷ 15,000)^(1÷18) − 1 = 6.67%
The education fund grew at an average annual rate of 6.67%, more than tripling over 18 years.
The initial investment must be greater than zero. Annualized return is undefined if you start with nothing.
For periods less than a year, use fractional years (e.g., 6 months = 0.5 years). The formula works with any positive time period.
CAGR is different from the arithmetic average. CAGR accounts for compounding and gives the true annualized growth rate.
If the final value is less than the initial value, the CAGR will be negative, indicating a loss. This is normal for volatile investments.
The annualized rate of return, also known as the Compound Annual Growth Rate (CAGR), is the geometric average annual return earned by an investment over a specified time period. It represents the constant annual rate that would produce the same final value if the investment grew at that exact rate each year, assuming profits are reinvested at the end of each year.
Unlike simple average returns, the annualized return accounts for the compounding effect, making it the most accurate measure of an investment's true performance over multiple years. For example, an investment that grows 100% in one year and then loses 50% the next year has an arithmetic average return of 25%, but its actual annualized return (CAGR) is 0% — because the value ended exactly where it started.
The annualized rate of return is the gold standard for evaluating and comparing investment performance. It allows you to compare investments of different durations on an equal footing. A 5-year investment that grew 50% total has a very different annualized return than a 2-year investment with the same total growth. By annualizing returns, you can make apples-to-apples comparisons across your entire portfolio and benchmark against market indices like the S&P 500.
Our Annualized Rate of Return Calculator is useful in countless real-world scenarios. Here are some of the most common applications:
Evaluate the annualized performance of your investment portfolio, mutual funds, or ETFs over any time period.
Calculate the annualized appreciation of rental properties, REITs, or real estate funds.
Measure the annualized revenue or profit growth of a business for valuation and strategic planning.
Project the required annualized return to meet future education funding goals.
Estimate the annualized return needed to reach your retirement savings targets.
Compare the annualized returns of different mutual funds or index funds to make informed investment decisions.
=(B1/A1)^(1/C1)-1 where A1 is the initial value, B1 is the final value, and C1 is the number of years. For example, if A1=10000, B1=16000, and C1=5, the formula returns approximately 0.0986 (9.86%). To display as a percentage, format the cell as a percentage. In Google Sheets, the same formula works identically. You can also use the RRI function: =RRI(C1, A1, B1) which directly returns the CAGR.
⚠️ Important Note: The annualized rate of return (CAGR) assumes steady growth with compounding and does not reflect actual year-to-year volatility. Past performance does not guarantee future results. Use this calculator as a guide and consult with a qualified financial advisor for critical investment decisions.