Annualized Return Calculator
The annualized return, or CAGR, smooths your total investment gain into a steady yearly growth rate. Enter your beginning value, ending value, and the number of years to see how your money grew per year.
How it works
The annualized return — also called the Compound Annual Growth Rate (CAGR) — converts your total investment gain into the constant yearly rate that would produce the same result. This makes investments of different lengths directly comparable.
The formula is: CAGR = (Ending Value / Beginning Value)^(1 / Years) − 1. For example, growing $10,000 to $18,000 over 5 years gives (18000/10000)^(1/5) − 1 ≈ 12.47% per year, even though the total return was 80%.
Tips
Use CAGR rather than total return when comparing investments held for different time periods — it removes the distortion of varying durations.
CAGR assumes smooth compounding and ignores the volatility along the way. Two investments can have the same CAGR but very different risk levels, so always consider the full picture.
FAQ
What is the difference between total return and annualized return?
Total return is the overall percentage gain over the entire period, while annualized return (CAGR) is the equivalent steady yearly rate. An 80% total return over 5 years equals roughly a 12.5% annualized return.
Does this account for dividends or additional deposits?
No. This basic CAGR calculation only uses your starting and ending values. For investments with cash flows added over time, a money-weighted return like IRR is more accurate.
Can the annualized return be negative?
Yes. If your ending value is less than your beginning value, the CAGR will be negative, showing the average yearly rate at which your investment declined.