This average return calculator turns a starting value, ending value, and number of years into a compound annual growth rate (CAGR). Enter the three inputs to get CAGR = ((end ÷ start)^(1 ÷ years) – 1) × 100, reported as a percent.
Investors use it to compare portfolios, funds, or project outcomes that span different lengths. For total gain without annualizing, pair this page with the ROI calculator. For forward growth with deposits, try the compound interest calculator.
How the formula works
Divide ending value by starting value. Raise that ratio to the power of one divided by years. Subtract one, then multiply by 100. The result is the constant yearly rate that would grow the start balance to the end balance if compounded once per year.
Worked example
Start $10,000, end $15,000, years 5. Ratio = 1.5. CAGR = (1.5^(1/5) – 1) × 100 ≈ 8.45 percent.
| Input | Value |
|---|---|
| Starting value | $10,000 |
| Ending value | $15,000 |
| Years | 5 |
| CAGR | ~8.45% |
How to use the fields
- Starting value is the balance or cost at the beginning of the window.
- Ending value is the balance or sale proceeds at the end.
- Years is the length of that window in years.
When CAGR helps
Use it when you care about a fair yearly rate across uneven timelines. A five year climb and a twelve year climb are hard to compare with raw dollar gains alone. CAGR puts both on an annual scale so you can rank options side by side.
What CAGR hides
Volatility inside the period disappears. Two paths can share the same start, end, and CAGR while one was smooth and the other swung wildly. If path risk matters, review yearly returns or drawdowns separately after you know the CAGR.
Common mistakes
- Using months as years without converting to year units
- Leaving fees out of the ending value when you meant net returns
- Comparing pretax and after tax endings as if they match
- Treating a short spike as a long run average
Planning checklist
- Confirm start and end are the same account or asset basis.
- Align currency and inflation treatment before you compare.
- Note whether contributions were added; large deposits change the story CAGR alone cannot tell.
- Recheck years if the holding period is not a round number.
Negative and zero cases
If the ending value is below the start, CAGR is negative. That is still useful for measuring average annual decline. Starting value must stay positive for this formula. A zero start is not valid for the ratio.
CAGR versus simple average
A simple average of yearly percents can look higher or lower than CAGR. CAGR answers a different question: what single annual rate compounds from start to end. Prefer CAGR when you need a linked growth rate for comparisons.
Contributions change the story
CAGR on start and end values ignores deposits and withdrawals inside the window. If you added cash every month, part of the ending value is new principal, not growth. For contribution heavy accounts, pair CAGR with a future value style projection so you do not overcredit the market for money you deposited.
When comparing two funds, try to use the same contribution pattern or use time weighted returns from statements. Otherwise the higher ending balance may simply reflect larger deposits.
Choosing the year count carefully
Count the exact holding period. A purchase in March and a sale in March five years later is about five years, not five calendar year labels on statements. Fractional years are fine when the tool accepts them. Rounding years up can understate CAGR for strong gains and overstate it for losses.
Very short windows are noisy. A three month spike annualized into a CAGR can look extreme. Prefer multi year spans when you want a planning rate rather than a headline.
Reporting and communication
When you share a CAGR, state the start value, end value, and years beside the percent. Without those anchors, readers cannot tell whether the rate applies to a tiny account or a large one. Keep currency consistent and note whether the ending value is before or after fees.
Limitations
Results ignore taxes, inflation, and mid period cash flows unless you fold them into the values you enter. For inflation context, see the inflation calculator. For building a future balance with monthly deposits, use compound interest tools rather than reverse engineering CAGR alone.