CAGR Calculator
Calculate the Compound Annual Growth Rate of your investment.
How Does Your Investment Compare?
See how your CAGR stacks up against common investment returns
US stock market average (1928-2023)
Tech-heavy US stocks
Worldwide stock markets
Safe government bonds
Property investment average
Precious metal store of value
High-yield bank savings
Your money loses this much yearly
These are historical averages. Past performance doesn't guarantee future results.
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What is CAGR?
CAGR stands for Compound Annual Growth Rate. It tells you the average yearly growth rate of an investment over a period of time.
Think of it like this: If your investment went from $10,000 to $20,000 over 5 years, CAGR tells you what steady annual return would give you the same result.
CAGR smooths out the ups and downs. Your actual returns might be +20% one year and -5% the next, but CAGR gives you one simple number for the average growth.
The CAGR Formula
Where:
- End Value = What your investment is worth now
- Start Value = What you started with
- n = Number of years
Example:
- Start: $10,000
- End: $20,000
- Years: 5
Why Use CAGR?
1. Fair Comparison CAGR lets you compare investments of different durations fairly. A 3-year investment with 50% total return vs a 5-year investment with 80% total return โ which is better? CAGR tells you.
2. Removes Volatility The stock market is bumpy. CAGR gives you a "smoothed" growth rate that's easier to understand and compare.
3. Industry Standard Financial professionals, fund managers, and analysts all use CAGR. When you see "10-year return" in fund reports, it's usually CAGR.
CAGR vs Simple Average
| Year | Return |
|---|---|
| 1 | +50% |
| 2 | -30% |
| 3 | +20% |
Simple Average: (50 - 30 + 20) / 3 = 13.3%
CAGR: Starting at $100:
- Year 1: $100 ร 1.50 = $150
- Year 2: $150 ร 0.70 = $105
- Year 3: $105 ร 1.20 = $126
- CAGR = (126/100)^(1/3) - 1 = 8.0%
The simple average overestimates your actual return!
Common Benchmarks
| Investment | Historical CAGR |
|---|---|
| S&P 500 (1928-2023) | ~10% |
| US Bonds | ~5% |
| Gold | ~7% |
| Real Estate | ~8% |
| Inflation (US) | ~3% |
If your CAGR beats inflation, you're actually growing your wealth. If it's below inflation, you're losing purchasing power even if the number goes up.
CAGR Limitations
- Doesn't show risk โ Two investments can have the same CAGR but very different volatility
- Assumes reinvestment โ All gains are reinvested (no withdrawals)
- Historical, not future โ Past CAGR doesn't guarantee future returns
Fun Facts ๐
๐ฐ Warren Buffett's Secret
Warren Buffett is worth over $100 billion, but here's the surprising part: he made 99% of his wealth after age 50. His CAGR isn't extraordinary (about 20%), but he's been doing it for 70+ years. The real magic isn't getting rich quick โ it's getting rich slow.
๐ฑ Apple's Insane CAGR
If you invested $1,000 in Apple in 2003 (20 years ago), it would be worth over $500,000 today. That's a CAGR of about 35%!
๐ฒ The Investor's Paradox
Two funds with the same 10% CAGR:
- Fund A: Steady 10% every year
- Fund B: +50%, -30%, +40%, -10%...
They end up at the same place, but Fund B will give you gray hairs! CAGR hides the emotional rollercoaster.
Real-World Perspective
| CAGR | What It Means | Example |
|---|---|---|
| 3% | You're losing to inflation | Bank savings account |
| 7% | Solid long-term growth | Index fund investing |
| 15% | You're doing great | Top-tier investors |
| 25%+ | Extremely rare | Early Amazon/Google investors |
If someone promises you 30%+ CAGR consistently, be very suspicious. Even the best investors in history rarely achieved this long-term.