Finance
Compute CAGR and average returns from investment values or annual returns.
Annualized Return (CAGR)
9.86%per year
Compound annual growth rate (CAGR) shows the consistent annual return needed to grow your investment from the initial value to the final value over the specified period.
Average return measures how much your investment grew on an annual basis. Unlike a simple average, the annualized return (CAGR—compound annual growth rate) accounts for the compounding effect: your money earned returns not just on the original amount, but on the accumulated growth year after year. This metric lets you fairly compare investments over different time spans and gauge whether your portfolio is performing well relative to inflation and benchmarks.
The calculator operates in two modes. In 'Investment Values' mode, you enter your starting and ending amounts plus the time span; it computes CAGR using the formula (final÷initial)^(1÷years)−1, then multiplies by 100 for a percentage. In 'Yearly Returns' mode, you paste annual returns as percentages; it calculates both the arithmetic mean (simple average) and the geometric mean (annualized return), which properly accounts for compounding. The tool also identifies your best and worst performing years.
CAGR = ((Final Value ÷ Initial Value) ^ (1 ÷ Years) − 1) × 100
Geometric Mean = ((1 + r₁) × (1 + r₂) × ... × (1 + rₙ))^(1÷n) − 1CAGR compounds annually: a 10% return grows ₹100 to ₹110, and next year's 10% applies to ₹110 (not the original ₹100). The geometric mean does the same—it multiplies all yearly factors (1 + return) together, then takes the nth root, ensuring returns compound correctly across years. Arithmetic mean, by contrast, simply adds returns and divides by count, ignoring compounding.
| Input | Result | Notes |
|---|---|---|
| Initial: $10,000, Final: $16,000, Years: 5 | CAGR ≈ 9.86% per year | Your money grew nearly 10% annually on average, compounded each year |
| Yearly returns: 12%, 8%, 15%, 10%, 9% | CAGR ≈ 10.76%, Simple average: 10.8% | Geometric mean (CAGR) is slightly lower than simple average because compounding dampens volatility differently |
| Yearly returns: 20%, −5%, 30%, 2% | CAGR ≈ 10.86%, Simple average: 11.75% | Large swings show the gap between simple average and true compound growth; CAGR reflects real wealth growth |
Simple average adds up returns and divides by the count (e.g., (10% + 20% + 5%) ÷ 3 = 11.67%). CAGR compounds: it reflects the real growth of your money year on year. If you start with ₹100 and gain 10%, then 20%, then 5%, you end up with ₹137.06—a CAGR of ~10.92%, not 11.67%. CAGR is more accurate for investment decisions.
This happens when returns are volatile. A sequence like 30%, −10%, 20% has a simple average of 13.3% but a lower CAGR because the −10% year applied to a smaller base. Losses hurt more than equivalent gains help (non-linear compounding). This is why diversification and steady returns matter more than chasing high-volatility investments.
Yes. If your investment lost value over time, CAGR will be negative. For example, ₹10,000 → ₹9,000 over 5 years = a CAGR of ~−2.06% per year. A negative CAGR means you're losing purchasing power; combine it with inflation data to measure real losses.
This calculator assumes no in-between flows. If you added or withdrew money, you'll need to either (a) break it into sub-periods and calculate separate CAGRs, or (b) use a spreadsheet with the IRR (Internal Rate of Return) function, which handles irregular cash flows correctly.
One year is not enough for a meaningful CAGR; the annualized return is simply that year's return. Always use at least 2–3 years of data to smooth out annual volatility and get a realistic sense of compound growth.
CAGR is a historical metric, not a prediction. Past performance does not guarantee future results, especially for volatile assets like stocks. Use CAGR as a reference point alongside other factors (fund quality, market trends, personal risk tolerance) when making investment decisions.