Average return calculator
Compound annual growth rate (CAGR) and the true average of yearly returns.
About this calculator
This average return calculator gives the compound annual growth rate, or CAGR, of an investment from its starting value, ending value and number of years.
You can also enter a list of yearly returns to compare the simple average with the true compounded one, and see how much the returns swing.
How it works
CAGR = (ending value ÷ starting value)^(1 ÷ years) − 1. From yearly returns, multiply (1 + each return) together, take the nth root and subtract 1: the geometric mean.
Last reviewed:
Worked example
- Work out from: Start and end values
- Starting value: $10,000
- Ending value: $16,500
- Years: 5 years
Average annual return (CAGR): 10.53%
Common questions
What is CAGR?
Compound annual growth rate: the steady yearly return that would turn the starting value into the ending value over the period.
Why is CAGR lower than the average return?
Losses hurt more than gains help: a 50% fall needs a 100% rise to recover. The simple average ignores that, so it overstates growth when returns go up and down.
What is a good average annual return?
It depends on the risk. Over long periods, broad stock markets have returned more than bonds or savings, but with much bigger swings from year to year.
Sources and further reading
The story behind it
Where the idea came from: A 50% loss followed by a 50% gain leaves you with 25% less money, even though the simple average of the two returns is 0%.
That is why investment reports use the compound annual growth rate. It is the single steady rate that turns the starting value into the ending value, whatever happened in between.
Why you can trust this calculator
- It runs in your browser. Nothing you type into it is sent anywhere.
- The method is explained on this page, so you can check it yourself.
- Free to use, with no sign-up.
- Results are estimates, not financial advice.
- Spotted a mistake? Tell us and we'll look into it.
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