How this calculator works
CAGR = (end value ÷ start value)^(1 ÷ years) − 1. It is the steady yearly rate that would have produced the same result.
For a list of yearly returns, the geometric average multiplies (1 + each return), takes the nth root and subtracts 1.
The arithmetic (simple) average just adds the returns and divides; it is always equal to or higher than the geometric average.
Returns should include dividends and be after fees for a fair comparison.
Worked example
Returns of +12%, −8%, +15%, +6%, −3% and +20%
- Simple average: 7.0%.
- Geometric average: about 6.5%, what you actually earned each year.
- A 50% loss followed by a 50% gain shows the gap clearly: the simple average is 0% but you have lost 25%.
Questions people ask
Which average should I quote?
The geometric average (CAGR) for past performance, because it matches the real growth of your money.
What is a good average return?
Over long periods, broad US stock indexes have averaged roughly 10% a year before inflation, with large swings between years.
What about money added along the way?
With deposits and withdrawals, use the IRR calculator, which accounts for the timing of each cash flow.
Does CAGR show risk?
No. Two investments with the same CAGR can have very different ups and downs. Look at the yearly returns too.
Last reviewed October 2, 2026