CAGR Calculator

What is a good CAGR?

The S&P 500 averages roughly 10% annually before inflation. A 7–9% real CAGR is excellent for a diversified long-term portfolio.

Why doesn't CAGR reflect volatility?

CAGR ignores the path of returns. Two investments with the same CAGR can have very different risk profiles.

How do you calculate CAGR by hand?

Use the formula CAGR = (Final ÷ Initial)^(1 ÷ years) − 1. Example: $10,000 growing to $21,589 over 10 years → (21,589 ÷ 10,000)^(0.1) − 1 ≈ 8.0% per year.

What is the difference between CAGR and average annual return?

CAGR is the geometric (compound) rate that smooths the whole period into one number. Average annual return is the simple arithmetic mean of yearly returns and ignores compounding, so it overstates growth when returns are volatile.

When should I use CAGR instead of total return?

Use CAGR when comparing two investments held for different lengths of time, or when you want the steady equivalent annual rate. Use total return when the holding period is fixed and you only care about the end result.