CAGR Calculator: How to Calculate Annualized Investment Return

A CAGR calculator turns a beginning value, ending value, and holding period into one annualized rate. If $10,000 becomes $20,000 over five years, the CAGR is 14.9%. Dividing the 100% gain by five would produce 20%, which is not the annual compound rate.

The calculation gives you a consistent way to compare periods of different lengths. It also compresses the path into one number, so you need to keep its limits in view.

What does CAGR mean?

CAGR means compound annual growth rate. It answers this question:

What single yearly rate would connect the beginning value to the ending value if growth compounded at that rate each year?

The market did not have to grow at that steady rate. A stock or portfolio could have gained 30% one year, fallen 12% the next, and still finish with the same CAGR as a much smoother path. CAGR describes the endpoints and the time between them. It does not describe the route.

CAGR formula

Use this formula when you have a positive beginning value, an ending value, and a time period measured in years:

CAGR = (Ending value ÷ Beginning value)^(1 ÷ Years) − 1

Multiply the result by 100 to express it as a percentage.

The formula needs three compatible inputs:

• Beginning value: the value at the start of the period.
• Ending value: the value at the end of the period.
• Years: the time between those values, expressed in years.

FINRA describes annualized return as a useful way to compare investments held for different lengths of time and gives the same compound-rate structure in its guide to evaluating investment performance.

CAGR calculator example: $10,000 to $20,000

Suppose an investment starts at $10,000 and ends at $20,000 after five years.

First, calculate the total return:

$20,000 ÷ $10,000 − 1 = 100%

Then annualize the change:

($20,000 ÷ $10,000)^(1 ÷ 5) − 1 = 14.87%

The CAGR is about 14.9% per year. This does not mean the investment delivered 14.9% in each calendar year. It means a steady 14.9% annual compound rate would connect the two values over five years.

If the ending value were $8,000 after four years, the same formula would produce a CAGR of about −5.4%. CAGR can describe a loss as well as a gain.

CAGR vs. total return

Total return describes the full change over the selected period. CAGR expresses that change as an annual compound rate.

Both figures use the same endpoints. They serve different purposes. Total return shows the size of the complete change. CAGR makes a five-year result easier to compare with another result measured over three, seven, or ten years.

Why you should not divide total return by years

Dividing a cumulative return by the number of years ignores compounding. It also treats each year as if it contributed the same amount.

Consider a $100 starting value:

• Year one: the value rises 50%, reaching $150.
• Year two: the value falls 20%, ending at $120.

The total return is 20%. The simple average of the two yearly changes is 15%. The CAGR is:

(1.50 × 0.80)^(1 ÷ 2) − 1 = 9.5%

The 9.5% rate connects $100 to $120 over two years under a compound-growth assumption. The 15% arithmetic average does not reproduce the ending value when compounded.

How to use an investment return calculator

Use the Equity Replay investment return calculator when you have two values and want to see total return and CAGR together.

1. Enter the beginning value.
2. Enter the ending value.
3. Enter the number of years between the two values.
4. Read the total return, dollar change, ending value, and annualized return together.
5. Check whether the values include dividends, fees, deposits, withdrawals, or taxes before interpreting the result.

The calculator annualizes the two values you provide. It cannot determine whether your source values include distributions or account activity. If you copy the endpoints from a brokerage statement, read how that statement calculates performance before comparing the result with a price chart.

Does CAGR include dividends and fees?

CAGR inherits the treatment of the beginning and ending values. If the values come from a total-return series that reinvests dividends, the result reflects that series. If they come from closing prices alone, the result describes price movement and excludes distributions.

Fees and taxes work the same way. A net ending value can produce a different CAGR from a gross ending value. Write down the price basis and cost treatment before comparing two annualized returns.

Equity Replay’s historical stock and ETF replays use available closing-price movement. They do not add dividends, fees, taxes, deposits, withdrawals, or trading execution. Read how the historical replay is calculated before comparing an Equity Replay result with a fund report or account statement.

CAGR is not the same as IRR

CAGR works best when one beginning value connects to one ending value over a defined period. Regular contributions, withdrawals, and transfers change the question because the amount invested changes during the period.

For an account with dated cash flows, a money-weighted return such as IRR or XIRR may be more appropriate. It accounts for the timing and size of those cash flows. The time-weighted return vs. money-weighted return guide explains why the two measures can produce different answers.

Do not feed a series of deposits into a two-point CAGR formula as if they were part of the investment’s growth. First decide whether you want to measure the asset path or the result experienced by the account.

How to compare annualized returns fairly

CAGR makes different holding periods easier to compare, but the comparison still needs matching inputs.

Use the same:

• start and end date convention;
• currency;
• price or total-return basis;
• treatment of dividends, fees, and taxes; and
• source or data-through date.

For example, a 40% cumulative gain over three years produces a CAGR of about 11.9%. The same 40% gain over seven years produces a CAGR of about 4.9%. The cumulative gain is identical, but the time required to achieve it is different.

When comparing stocks or ETFs, use the stock comparison view to inspect the normalized historical paths as well as the endpoint change. A CAGR hides drawdowns and the order of gains and losses. The chart can show whether two investments reached similar endpoints by taking very different routes.

CAGR and a historical portfolio replay answer different questions

Equity Replay applies selected stock or ETF weights once at the beginning of a historical window and shows how the defined mix moved across available closing prices. That replay can give you a beginning value, ending value, and historical change for the selected scenario.

The investment return calculator can annualize those two values. The result is a CAGR-style summary of that defined historical path. It is not a formal account return because the replay does not include cash flows, dividends, fees, taxes, or transactions.

You can build an illustrative portfolio, compare two allocations, and then read the calculation methodology. Keep the symbols, weights, dates, and price basis visible when you share a result.

What CAGR cannot tell you

CAGR is useful, but it leaves out several parts of an investment result:

• the sequence of gains and losses;
• volatility and drawdowns;
• the timing of deposits and withdrawals;
• whether dividends and fees are included;
• the reason an asset moved; and
• whether the rate will repeat in the future.

A high historical CAGR does not make an investment suitable for a person’s goals or risk tolerance. It also does not predict the next period. Use the number as a compact description of a defined past interval.

The short version

To calculate CAGR, divide the ending value by the beginning value, raise the result to the power of one divided by the number of years, and subtract one. A $10,000 value that becomes $20,000 over five years has a CAGR of about 14.9%.

CAGR annualizes a two-point change. It does not replace total return, IRR, or a chart that shows the path. Equity Replay is an educational historical simulator, not a broker, investment adviser, or record of trades. Its replays and calculators are illustrative and do not provide financial advice or a recommendation to buy, hold, sell, or rebalance an investment.

Sources and further reading

• FINRA: Evaluating investment performance
• FINRA: Calculating your investment returns
• Investor.gov: Annual return
• Equity Replay: Investment return calculator
• Equity Replay: Time-weighted return vs. money-weighted return