The formula
How to calculate annualized return
The compound annual growth rate is the steady yearly return that would have taken an investment from its starting value to its ending value. It is the only fair way to compare holdings kept for different lengths of time.
The intuitive shortcut — total return divided by years — overstates the answer, because it ignores compounding. An 85% gain over seven years is not 12.1% a year; it is 9.2%, and the gap widens the longer the period.
The inputs, one by one:
- Value at the start
- Value at the end
- Years held (years)
Results appear immediately — there is nothing to submit. Changing a field rewrites the link, so you can share the exact scenario you are looking at.
Worked example
Here is the calculation with the starting values:
- Value at the start: 10,000
- Value at the end: 18,500
- Years held: 7 years
That gives:
- Annualised return (CAGR): 9.19 %
- Total return: 85 %
- Money multiple: 1.85 ×
Reading the result
CAGR is a smoothed figure. It describes the endpoints and says nothing about the path: two holdings with the same CAGR can have had wildly different volatility, and one of them may have been unholdable along the way.
Where this goes wrong. Ignoring deposits and withdrawals. If money went in or out during the period, CAGR on the account balance is meaningless — the correct measure is a money-weighted return such as IRR or XIRR.
No. The arithmetic average of yearly returns is always at least as high as the CAGR, and the gap grows with volatility. A year of +50% followed by a year of −50% averages 0% but has a CAGR of −13.4%, which is the figure your balance actually reflects.
Global equities have returned roughly 7–8% a year in nominal terms over long periods, or about 5% after inflation. Any figure well above that over a short holding period is more likely luck or leverage than skill.
It returns annualised return (CAGR). With 10,000 value at the start, 18,500 value at the end and 7 years years held, that comes to 9.19 %. Change any field and the figure moves with it.