What Is CAGR?
CAGR (compound annual growth rate) is the single steady yearly rate that would turn your starting value into your ending value over a period. It is the standard way to state how fast an investment actually grew.
The formula
CAGR = (End Value / Start Value)1/years − 1
Example: $10,000 grows to $25,000 over 10 years. CAGR = (25,000 / 10,000)1/10 − 1 = 9.6% per year. The portfolio did not earn 9.6% every single year, but it grew as if it had.
Why not just average the yearly returns?
Because losses hurt more than equal gains help. A +50% year followed by a −50% year has an average return of 0%, yet you actually lost 25% of your money (1.5 × 0.5 = 0.75). CAGR reflects the real, compounded outcome; simple averages flatter volatile investments.
What is a good CAGR?
Over the last century the S&P 500's CAGR is roughly 10% before inflation. Diversified portfolios with bonds have historically earned less with much smaller drawdowns: a classic 60/40 portfolio has landed near 8%. Comparing CAGRs is only meaningful alongside risk, which is why backtests here also show volatility, max drawdown, and the Sharpe ratio.
See the CAGR of any portfolio
The free backtester computes CAGR (with dividends reinvested) for any mix of stocks, ETFs, gold, or crypto, over any period back to 1871.
Frequently asked questions
What is a good CAGR for a portfolio?
For context, the S&P 500's long-run CAGR is about 10% per year before inflation (roughly 7% after). A diversified 60/40 stock/bond portfolio has historically landed around 8%. Anything promising far more than that involves far more risk.
What is the difference between CAGR and average annual return?
The simple average of yearly returns ignores compounding and overstates growth when returns are volatile. CAGR is the single steady rate that actually turns the starting value into the ending value, so it is always the better summary of realized growth.
Does CAGR include dividends?
Only if it is computed from total returns. On this site, every CAGR figure uses total return with all dividends reinvested.
Past performance is not a guarantee of future results - see the disclosures in the footer and the methodology.