Calculate the average annual growth rate of any investment. CAGR smooths out volatility to show you the true annualized return.
CAGR (Compound Annual Growth Rate) is the smoothed annual rate of return that an investment would need to grow from its beginning value to its ending value over a given period. It eliminates the noise of year-to-year volatility and gives you a single, clean number to evaluate performance.
CAGR is the most honest way to compare investments across different time periods. A stock that went from $100 to $200 in 5 years has a CAGR of 14.9%. One that did the same in 10 years has a CAGR of 7.2%. The total return is the same (100%), but the annual growth rate tells the real story.
CAGR and average return are different. If a stock goes up 50% one year and down 33% the next, the average return is +8.5% — but CAGR is 0% (you're back where you started). CAGR accounts for compounding and is always the more accurate measure of actual growth.
The S&P 500 has delivered a CAGR of approximately 10% over the past 50 years (7% after inflation). Anything consistently above 15% CAGR is exceptional — Warren Buffett's Berkshire Hathaway achieved about 20% CAGR over 50+ years.
Only if you use total return values (price appreciation + reinvested dividends). When using just stock prices, CAGR only reflects price growth.
For stocks: 7-10% is average (S&P 500), 10-15% is good, 15-20% is excellent, and 20%+ is exceptional. For bonds: 3-6% is typical.
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